LEGAL experts this week queried President Emmerson Mnangagwa’s move to exempt the newly established Mutapa Investment Fund (MIF) from the Public Procurement and Disposal of Public Assets Act, saying he had not only violated the Constitution, but exposed the asset to looting.
Speaking during the Zimbabwe Economic Development Conference in Victoria Falls early this week, George Guvamatanga, permanent secretary in the Ministry of Finance and Investment Promotion, said the procurement Act only applies to the MIF, not state entities under its stewardship.
But experts said there were several violations to the law that emerged as a result of changes announced through a Statutory Instrument (SI) on September 19.
SI 156 of 2023 renamed the Sovereign Wealth Fund of Zimbabwe to MIF and placed 20 state-owned enterprises (SOEs) under its management.
A week later, Mnangagwa issued another proclamation exempting the fund from public procurement laws, triggering a backlash across the country, with people warning that lack of transparency would end in disaster.
Experts said by implication, apart from MIF, the 20 firms are now also sitting outside public scrutiny.
In an interview with businessdigest, Edwin Manikai, senior partner at Dube, Manikai and Hwacha Law Chambers said SI 156 could be interpreted as a provisional law, pending the enactment of a primary piece of legislation.
“I envisage that SI 156 / 2023 is interim provisioning pending the putting in place of primary legislation to amend the relevant statutory provisions,” Manikai said this week.
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“This should be permissible for a period of 180 days, but must be fortified by an Act of parliament.”
Legal and economic experts agreed this week that MIF and all firms under its management were prone to corruption if they are exempted from public procurement legislation.
For many years, the Auditor-General’s Office has warned that among many ways through which government has been losing money was through procurement.
Citizens Coalition for Change Vice President and lawyer, Tendai Biti also told Zimbabwe Independent SI 156 was written in terms of the Presidential Powers Temporary Measures Act.
Biti, Zimbabwe’s minister of finance during the inclusive government between 2009 and 2013, said the Act allows the President to make laws during emergency situations.
He said Section 5 of that Act says laws or regulations that the President makes in terms of Section 2, Subsection 2, will override any Act of Parliament.
“But, clearly, Section 2 of the Presidential Temporary Measures Act is unconstitutional because Section 134 of the Constitution makes it clear that parliament, the primary law-making powers, cannot be delegated,” Biti argued.
“The decision to amend an Act of parliament can only be made by Parliament. So, clearly, Section 2 of Subsection 2 of the Presidential Powers Temporal Measures Act is unconstitutional.
“It is not legal. Once again, in SI 156 of 2023, the President has amended the procurement law. He now has powers to exempt state-owned enterprise from the application of the procurement law. Only Parliament can do that.
“In that particular issue, Parliament itself cannot do that. Section 313 of the constitution says that all public procurement must be done transparently in government,” Biti stated.
In that regard, he argued, not even Parliament can suspend the procurement law.
In his presentation in Victoria Falls, Guvamatanga tried to justify government’s actions.
“The Statutory Instrument that brought about the above changes amended the Sovereign Wealth Fund Act, also amended the Public Procurement and Disposal of Public Assets Act by introducing a new subsection 9 to Section 3,” he said.
“Section 3 already dealt with exemptions. So that amendment has made it possible that those public entities which operate in competitive markets, may (and not shall) be accorded an exception from the application of the Procurement Act.
“On Friday, His Excellence exempted one public entity, that is Mutapa Investment Fund from application of the procurement law. To be clear, in terms of the law, as contained in the general notice published last Friday, the exemption applies only to the fund and not to any of the other entities listed on the schedule.
“The fund merely owns shares in those entities but that does not change their legal character as separate legal entities, distinct from the Fund,” Guvamatanga added.
Biti, however, stated that the inclusion of SOEs under MIF had essentially privatised them.
Allen Choruma, permanent secretary in the Office of the President Corporate Governance Unit, last week confirmed that the inclusion of the SOEs into MIF was government’s intention.
“The rules to the fund are being worked on. What we have is just the legal instrument. And the intention is to move these entities which are called prescribed entities. Once these entities are moved to the Mutapa Investment Fund, they will lose their public entity status as they are dissolved into this one fund.” Choruma said
“What the President has done is to effectively convert the Sovereign Wealth Fund. The Sovereign Wealth Fund has been converted into an asset management company,” he said.
However, Biti added that this could not be done when assets under the portfolio were already public assets to begin with.
Biti said: “What has been done here is the privatisation of shares from state owned enterprises without Parliament’s approval. This was done without scrutiny and regulatory authority”.
In a comprehensive analysis of the Fund this week, Fadzayi Mahere, a prominent Zimbabwean lawyer and politician said by shielding MIF from reporting to parliament, authorities had opened the assets to unrestricted plunder.
“Before the amendment, the Sovereign Wealth Fund Board had an obligation to make quarterly reports to the Minister of Finance who was equally obliged to table the Fund’s reports before Parliament,” Mahere said.
“However, SI 156/2023 has taken away the obligation to table the board’s reports before Parliament. The Board only tables reports to the President and the Minister of Finance. This removes all pretence of public scrutiny over the Fund’s operations and investments,” she said.
“The scope for Parliamentary oversight of the fund’s investments and operations, which is an essential element of sound public financial management, has also been severely curtailed.
“The risk is that looting and abuse of the fund’s assets and resources will be hidden from public scrutiny.
“Mr Mnangagwa’s unconstitutional changes to the legal framework of Zimbabwe’s Sovereign Wealth Fund signal a new era of predatory looting of state assets and natural resources...
“Zimbabwe, a country reeling under 49% extreme poverty, triple digit hyperinflation and an annual loss of US$2,2 billion to illicit financial flows cannot afford for its resources to bleed further.
“It behoves all institutions of the State with a mandate to oversee corruption and poor public management including the Auditor-General, Parliament, the judiciary, the media and the general citizenry to speak out against this illegal conduct and ensure that this latest unconstitutional enactment is reversed.
“If this is not done, billions in state resources will be lost once again without any accountability or disclosure,” Mahere argued.
