Frameworks, Procedures and Guidelines for Implementing the Indigenisation and Economic Empowerment Act (G.N. 394A of 2015)

1. The M inister of Youth , lndigeni sation and Economic (iii) Describe the indigenisation compliance process flow; Empowerment was mandated to s implify and clarif-y the guidelines and processes for complying with the count1-y's (iv) Highlight the National Indigenisation and Economic Indigenisation and Economic Empowerment laws espoused in Empowerment Charter; and the Tndigenisation and Economic Empowe1m enl Act [Chapter (v) Outline measuresforensuringcompliancewithprocurement 14:JJ]("IEEAct")in orde r to achieve the following objectives: require ments of the legislation. Encouraging private sector investment in line with His Excellency, the President's 10-point economic plan; Resources-Based Sector Economically empower indigenous Zimbabweans; and 6. His Excellency Preside nt Mugabe spoke to the policy position on natural resources during hi s inauguration speech of 22nd Ensuring compliance with the law. August, 2013, in which he states:

2. In the State of Nation Address, His Excellency, the President, "As we go abou/ reorganising this critical 111i11i11g sector, made it clear that "in line with the Rapid Approach Framework, our policy reflexes mus/ be oriented lowards !he goals of we should see, before 31st December, 2015, an urgent overhaul i11digenisation and economic empowerment of o ur p eople. of the Companies Act and all pieces of allied legislation which have hitherto hindered the Ease of Doing Business. Instead, Tlzis was t/ze centrepiece of our manifesto. Tlzis is 111/zat we expect to have a clear and robust legislation and regulatory the p eople voted for. It must become the ce,itrepiece of our framework to be urgently put in place in order to create a development endeavours. One Stop Investment Centre that streamlines processes and We dare 1101 let our people down . We are aware that people procedures. This is now vet-y urgent and high priority matter of ill will have cast aspersions 011 our hallowed policy of for which those responsible will be held to account." i11dige11isa1ion and economic empowerment. Well, ii is a se/

3. During my 2016 National Budget Statement , 1 indicated that: policy, our chosen palh to full sovereignty. "Co11sultatio11s towards strengthening and clarifying the The premise of 1ha1 policy is an easy one . Our minerals are process ofi111plementi11g the i11digenisatio11 policies i11 the other a dep/e1able resource. We ca1111ot grow !hem again once 1hey sectors of the economy oil/side the resources sec/or have been have been exp/oiled." completed. To this end !he Minister of Youth, flldigenisatio11 and Eco110111ic Empowerment, will bea1111ou11cingand gaze/ling before Christmas 1heframeworks 'le111pla1es and procedures/or 7. Duringmy2016National Budget presentation I also highlighted implementing !he indige11isatio11 policies in a manner that both that: promotes invest111e111 and eliminates discretiona,)' applica1io11 "The position ofi11dige11isatio11 in !he resource sec/or has been of !he law. Such measures will conlribute im111e11sely lowards clarified 011 several occasions bylzis Excellency the President to the ease of doing business in /he country and will render the ref/eel Ihm 1/re contrib11lio11 of our designated entilies 101vards services sector of our country conducive for Foreign Direct our 51% shareholdi11g will be effected 1/rro11glz the resource /11vestme11t." being exp/oiled and al 110 monelary cost to 1he Government or designated enlities." FRAMEWORK

4. The framework as agreed amongst the Minister of Youth. 8. According Lo section 3(1) of the IEE Act: lndigenisation and Economic Empowerment, the Minister of The Govemmenl shall, 1hrough !his Act or regulations or olher Finance and Economic Development and the Governor of the measures under this Act orany other law, endeavourto secure lhat- Reserve Bank of Zimbabwe seeks to eliminate discretionary application oflaw by providing guidance on the implementation At leas/ fifty-one per ce11111111 of the shares of every public of the Indigenisation and Economic Empowerment Act in the company and any other business shall be owned by indigenous following three broad categories: Zimbabweans. 1374B ZIMBABWEAN GOVERNMENT GAZETTE EXTRAORDINARY, 24m DECEMBER, 2015

9. The Indigenisation and Economic Empowennent (General) and/or that one, you ca11 go 50/50 or you can agree on a ratio Regulation (2010) provides a broader definition of natural which is sustainable and equitable. It is 1101 every case that we . resources that include the following: must apply the 51/49. • Air, soil, waters and minerals in Zimbabwe; 15. The non-resource sectors of the economy include the • Mammal, bird, fish and other animal life in Zimbabwe; manufacturing, financial services, tourism, construction and • The trees, grasses and other vegetation of Zimbabwe; energy among others. • Springs, vleis, sponges, reed beds, mashes, swamps and 16. Section 3(5) of the IEE Act provides that: public streams of Zimbabwe; and The line Minister may prescribe that a lesser share thanfifty- • Any landscape, scenery or site having aesthetic appeal or one per centum or a lesser interest than a controlling interest scenic value or of historic or archaeological interest. may be acquired by indigenous Zimbabwea11s in any business

10. General Notice 114 of ZOU provides for indigenisation in the in terms of subsections (l)(b)(iii), (l)(c)(i), (l)(d) and (e) in mining sector by requiring that businesses operating within order to achieve compliance with those provisions, but in so this sector must dispose of 51 % equity to designated entities doing he or she shallprescribe the ge11eral maximum timeframe while taking into account the State's sovereign ownership of within which thefifty-one per centum or the controlling interest the mineral or minerals exploited or proposed to be exploited shall be attained. by the non-indigenous mining business concerned. Simplification and Clarification of the lndigenisation

11. To reflect the broad-based objectives of the Government's Framework empowennent policy, the designated entities which shall acquire 17. Section 3(a) of the Indigenisation and Economic Empowerment the51 % equity in businesses exploiting natural resources include (General) Regulations, 2010, ("IEE Regulations") states that: • National lndigenisation and Economic Empowennent Within the next five years from the date of operation of these Fund; regulations, or within five years from the commencement of • Sovereign Wealth Fund; the business concerned, as the case may be, cede a controlling • Employee Share Ownership Trusts; interest of not less than fifty-one per centum of the shares or • Community Share Ownership Trust; interest therein to indigenous Zimbabweans,· unless,in order to achieve other socially or economically desirable objectives, a • Zimbabwe Mining Development Corporation (ZMDC); lesser share ofindigenisation ora longer period within whicli • Zimbabwe Consolidated Diamond Company (ZCDC) ,and lo achieve it is justified. • Any other company incorporated by Government or in 18. In respect of the non-resources sectors, the following which Government has a controlling interest. predetermined framework shall be implemented with immediate

12. In the tourism sector any businesses wholly dependent upon and effect. exploiting natural resources must comply with indigenisation ~rovision of Longer Period for Compliance to the extent of 51 %.

19. Anon-indigenous business may hold the majority shareholding Non-Resources Sectors for a period ranging up to 5 years (except for the energy sector

13. The legislation requires that at least 51 % of the shares of which can go up to 20 years), which period may be extended every business shall be owned by indigenous Zimbabweans as upon application in terms of section 3 (a) of the IEE Regulations. stipulated in section 3(1) paragraph (a) of the Indigenisation Provision of a Lesser Share of lndigenisation and Economic Empowerment Act [Chapter 14:33].

20. Further, empowerment credits as provided in Table l shall be

14. During an interview to mark bis 89th birthday, President taken into account in achieving the 51 % indigenisation threshold Mugabe responded to a question on a perceived "Public spat in order to support the country's socially and economically between officials of the same Government over the issue of desirable objectives. Indigenisation and Economic Empowerment, stating that: Provision for Dilution of Equity in Resource Based Sectors "Well I suppose it is the application, how do we apply that principle 51/490/Indigenisationand Economic Empowerment? 21. The 51 % equity held by designated entities in the resource When ii comes to the natural resources that is very clear". based sectors of the economy may be diluted to the extent of injection of additional capital by foreign shareholders on a pro "When it comes now to areas oftechnology, in/act the technology rata basis subject to the condition that the designated entities is borrowed, then you cannot apply the same principle of the shall be entitled to buy new shares in order to restore their (51149) because this is not yours .... Those who have brought shareholding to 51 % within a period ranging up to 5 years, the resource here own the resource, what you can say is you are which period may be extended upon application in terms of participating in that resource that is coming into the country section 3(a) of the IEE General Regulations. Construction F.ncrgJ' Finance Tdecoms/lCT Manufacturing Tourhm Transport Aru Entertainment and 20Yn. Servicn Culture Direct Eouitv sow. 201(, 20% 511% 209' 309' 259' SO% 509' Social & Economic Empowerment Objectives Agriculture 8 SMEs and Micro financing 2 Youth pro2l'llmmes 2 Women prosuammes 2 Low cost housing 4 Vocational Training 5 4 4 4 4 Skills Development 3 2 2 6 Value Addition 10 5 Preferential Procurement 4 4 5 3 3 Carbon Neutral Environment & 5 2 4 3 5 Empowerment Linkage/Outsourcing Prognunmes 5 2 2 2 Enterprise Development 3 1 3 3 Socio-economic Development Initiatives 5 3 Educational Bursaries 1 National Economic Empowerment Charter 1 1 1 1 1 1 1 1 1 Total Crcdlts 1 31 31 I 31 21 26 1 1 Grand TOTAL 51 51 SI 51 51 51 51 51 51 ZIMBABWEAN GOVERNMENT GAZETTE EXTRAORDINARY, 24TH DECEMBER, 2015 1374C

22. The calculation of the empowerment credits which are given accordance with the simplified Indigenisation and Economic in Table 1 shall be developed and monitored to reflect the Empowerment framework and by so doing, accelerating the peculiarities of each sector and subsector by the line ministries ease of doing business as well as the operationalization of the in liaison with NIEEB. one stop investment centre. Reserved Sectors for Indigenous Zimbabweans 34. All companies that have not yet submitted their lndigenisation

23. The IEE Regulations stipulate in the Third Schedule, sectors Implementation Plans as required by the Act should submit their that are reserved for indigenous Zimbabweans. applications through ZIA by the new deadline of 31st March, 2016.

24. Table 2 shows the sectors to be reserved in favour of indigenous Zimbabweans. 35. During its normal course of processing, ZIA would consult with the line ministries and the National lndigenisation and Table 2: Reserved Sectors Economic Empowerment Board (NlEEB) which shall play, under the guidance of the Ministry of Youth, Indigenisation Existing Sub-sector and Economic Empowerment (MYIEE), a supervisory and Agriculture, primary production of food and cash crops monitoring role to ensure Government entities comply with the Transportation: passenger buses, truces and car hire services lndigenisation and Economic Empowerment Act and other set regulations and policies. This process is in line with regional Retail and wholesale trade best practice. Barber shops, hairdressing and beauty salons

36. Applications that do not conform to the predetermined Employment agencies framework i.e. exception applications will be lodged by NIEEB Estate agencies and Real Estates in consultation with the line ministries through MYIEE for consideration by Cabinet through the Cabinet Committee on Bakeries r Advertising agencies Provision of local and craft, marketing and distribution lndigenisation and Economic Empowerment. SCHEMATIC PROCESS Tobacco grading and packaging lnvcslmall Certificate _ _0_R_ _ Application -~I_NVES1i I Cigarette Manufacturing { Compliance Cmificarc + FRONT OFFICE Valet services Mille processing ZIA Processing of all } (Investor Interface) appJicatlons uslng the predetennined framework Grain milling Proposed Sub-sector NIEEB Monitoring and Supervisory Role Fuel retailing Artisanal mining of all minerals (except diamond) MYIEE Certificate of Compliance

25. No new non-indigenous businesses will be allowed to invest Processing of non-compliant/ in the reserved sector unless under special cases as determined exception appl"tcations by Une BACK or approved by Cabinet. Ministry omCE p...No l!Jnstor

26. The provisions in the ZIA Act defining the reserved sectors MYIEE Coutact will be repealed so that there are no inconsistencies in the legal framework. CABINET COMMITI'EE ON EMPOWERMENT LEVY I&EE

27. An Empowerment Levy at the prescribed rate shall be levied on all businesses. CABINET Uses of the Levy

28. The levy will be used for economic empowerment activities as set out in section 12 of the lndigenisation and Economic PROCUREMENT Empowerment Act. 37. All Government departments, statutory bodies and local

29. The funds realised from the levy shall be used to facilitate authorities and all companies are to procure at least fifty per economic empowerment of the indigenous Zimbabweans centum of their goods and services required to be procured including Youths, Women and people with disabilities. in terms of the Procurement Act [Chapter 22:15] from local businesses. NON-COMPLIANT BUSINESSES

38. The Ministry of Youth, Indigenisation and Economic

30. Existing foreign-owned businesses may continue to operate Empowerment will be engaging with the procuring entities and in all the sectors of the economy but shall be required to pay other appropriate authorities who are involved in procurement an indigenisation compliance levy as a trade-off for non- arrangements in an effort to ensure compliance with these compliance. provisions.

31. An indigenisation compliance levy is to be imposed on a 39. To the extent necessary, the Attorney General's Office will sliding scale rewarding businesses which are compliant whilst ensure that the law is aligned to the framework set out herein. penalising non-compliant businesses. NATIONAL INDIGENISATION AND ECONOMIC Reserved Sectors EMPOWERMENT CHARTER

32. For the reserved sectors the indigenisation compliance levy will 40. The Indigenisation and Economic Empowerment Act, section be determined on the basis of the compliance level that excludes 16 read with the Fourth Schedule, provides for a National credits for socially and economically desirable objectives. Indigenisation and Economic Empowerment Charter, to the effect that indigenous businesses benefitting from NIEEF, INVESTMENT APPLICATION PROCESS or the indigenisation programme, must comply to the best of

33. All investment applications will be submitted through the their ability with the framework for ethical and good business Zimbabwe Investment Authority (ZIA) for processing in conduct contained in the Charter. 1374D ZIMBABWEAN GOVERNMENT 0.AZETra EXTRAORDINARY, 24TH DECEMBER, 2015

41. The Ministry of Youth Indigenisation and Economic Empowerment will make the provision of rebates conditional upon commitment to abide by the principles of the NIEEC so as to ensure that indigenous business entities develop a reputation CONTENTS of good governance and ethics.

42. Indigenous businesses must comply with the National Ge11eral Notice Indigenisation and Economic Empowerment Charter, and must be bound by the provisions of the Charter. The Charter N1m1ber Page has been developed and put into legislation for the purpose of 394A. Frameworks, Procedures and Guidelines for Implementing the rebranding indigenous businesses. Indigenisation and Economic Empowennent Act [Chapter 14:33] 1374A HON. P.A. ClllNAMASA (MP), 24-12-2015. Minister of Finance and Economic Development. Pri11ted by the Govenime11I Pri11ter, Harare.