LEGAL ISSUES IN PRIVATISATION

1. LEGAL FRAMEWORK

In the most material terms the general principle where privatisation is concerned is to work within the frame work imposed by the enabling legislation and the common law.

In 1992 the Zambian National Assembly passed the Privatisation Act 1992 (Act No. 21 of 1992) which is now known as Chapter 386 of the Laws of Zambia.

2. ESTABLISHMENT OF ZAMBIA PRIVATISATION AGENCY

The Zambia Privatisation Agency (hereinafter referred to as the "Agency") is a statutory body established under Section 3 of the Privatisation Act. Section 3 provides as follows:

"There is hereby established the Zambia Privatisation Agency which shall be a body corporate with perpetual succession and a common seal capable of suing and of being sued in its corporate name, and with power, subject to the provisions of this Act, to do all such acts and things as a body corporate may be law do or perform."

The Agency does not have a physical existence. It only has a legal one. The management of its affairs is entrusted to human instruments - members of the Agency -, i.e., the equivalent of a Board of Directors of a Company registered under the Companies Act.

The Agency is an independent body with an in built private sector majority. By law only three of the twelve members are appointed by the State and these are:

(1) The Permanent Secretary in the Ministry responsible for Commerce, Trade and Industry;

(2) The Permanent Secretary in the Ministry responsible for Finance; and

(3) The Attorney-General.

The rest of the members are independently nominated by various sponsoring bodies, vetted by Parliament before being finally appointed by the President, and are the following:

(a) A representative of the Zambia Confederation of Chambers of Commerce and Industry (ZACCI);

(b) A representative of the Zambia Congress of Trade Unions (ZCTU);

(c) A representative of the Zambia Federation of Employers (ZFE);

(d) A representative of the Law Association of Zambia (LAZ);

(e) A representative of the Zambia Institute of Certified Accountants (ZICA);

(f) The Dean of the School of Business of the Copperbelt University (CBU);

(g) A representative of the Churches in Zambia;

(h) A representative of the Bankers Association of Zambia (BAZ); and

(i) A representative of the farmers.

As can be seen from the composition of the Agency it is by far an independently chosen grouping of persons which is in fact broad based. To ensure that the State does not exert undue influence on the Agency, the Chairman and Vice Chairman of the Agency are elected from members drawn from the private sector. Members of the Agency drawn from the public sector are ineligible, by law, for election as Chairman and Vice Chairman respectively.

Save for matters statutorily provided for such as:

(a) The frequency of holding meetings -, i.e., once every two months;

(b) The giving of notices of meetings -, i.e., not less than 14 days for general meetings and a shorter notice for special meetings;

(c) Quorum -, i.e., five members;

(d) Chairing of meetings;

(e) Voting at meetings;

(f) Attendance by non-members at meetings;

(g) Validity of proceedings despite vacancy in the membership of the Agency or defect in the appointment of any member; and

(h) The keeping of minutes of meetings,

the Agency may regulate its own procedure.

3. FUNCTIONS

By Section 8 of the Privatisation Act, it is the function of the Agency to plan, manage, implement and control the privatisation of State owned enterprises in Zambia. But notwithstanding the generality of this statement it should be noted that by law the functions of the Agency include the foregoing, that is to say:

(a) recommending policy guidelines to the Cabinet;

(b) implementing the privatisation programme according to the policy guidelines issued by the Cabinet;

(c) overseeing all aspects of the implementation of the privatisation programme in Zambia;

(d) monitoring progress of the privatisation programme;

(e) preparing the long term divestiture sequence plan and submitting such plan to the Cabinet for approval;

(f) recommending to the Cabinet the most appropriate method of sale for each State owned enterprise to be privatised;

(g) carrying out or causing to be carried out a valuation of a State owned enterprise that is to be privatised;

(h) setting pre-qualification criteria for the selection of potential buyers or investors of a State owned enterprise to be privatised;

(i) evaluating offers from potential buyers with regard to the

(1) price;

(2) ability and commitment of buyers to develop the enterprise; and

(3) track record of buyers and their expertise in the type of enterprise on offer.

(j) ensuring that monopolies are not created in the process of privatisation;

(k) preparing or causing to be prepared the relevant documentation necessary to effect the Privatisation of any State owned enterprise;

(m) maintaining records, safeguarding information and establishing administrative procedures to ensure confidentiality of information;

(n) maintaining close liaison with all relevant institutions in the process of privatisation;

(o) publicising the activities of the privatisation programme; and

(p) doing all such things as are necessary or incidental or conducive to the better carrying out of the functions specified in the Privatisation Act.

It should be noted that in carrying out its statutory functions the Agency does so in liaison with other institutions. These include:

(1) The Cabinet;

(2) The Ministry responsible for Commerce Trade and Industry;

(3) The Ministry responsible for Finance;

(4) Other line Ministries;

(5) ZIMCO (In Liquidation);

(6) Other shareholders in State owned enterprises;

(7) The Attorney-General;

(8) Bidders (Zambian/Foreign);

(9) Unions;

(10) Other interested parties.

4. FUNDING

The funds of the Agency consists of such money as may:

(a) be appropriated by Parliament, for the purposes of the Agency;

(b) be paid to the Agency by way of grants or donations;

(c) be retained by the Agency from the proceeds of sale as may be approved by the Minister responsible for finance; and

(d) vest in or accrue to the Agency.

And by law the Agency may:

(a) accept money by way of grants or donations from any source in Zambia;

(b) raise money by way of loans from any source in Zambia and, subject to the approval of the Minister, from any source outside Zambia, such moneys as it may require for the discharge of its functions;

(c) charge and collect fees in respect of programmes, publications, seminars, documents, consultancy services and other provided by the Agency.

The Agency may invest in such manner as it thinks fit such of its funds as it does not immediately require for the performance of its functions.

At this point in time it must be noted that the Agency is legally obliged to keep proper books of account and other records relating to its accounts. And its accounts must be audited annually by independent auditors appointed by the Agency.

5. THE PRIVATISATION PROCESS

State owned enterprises in Zambia are privatised in accordance with the divestiture sequence plan. This plan is prepared by the Agency and approved by Cabinet.

To start the process after carrying out relevant privatisation studies a list of Companies to be privatised is published in the Government Gazette. This is usually followed up by advertisements calling for bids for individual Companies.

Once bids are received a rigorous appraisal process by teams of Agency staff and Consultants is done.

Valuation of State owned enterprises are undertaken by independent professional accountants/merchant banks.

Negotiations are done by an independent negotiating team appointed by the Agency comprising of persons:

"having proper professional qualifications, experience and good business standing."

The draft Sale Agreement is inter alia reviewed by the Attorney-General.

To assist in carrying out the privatisation process the Agency usually sub-contracts some work to various professionals such as:

Lawyers;

Accountants; and

Real estate agents.

6. OBLIGATIONS TO INFORM AND REPORT

1. The Agency must publish notice in the Government Gazette:

(a) the names of the approved State Owned Enterprises to be privatised;

(b) the registered consultants, valuers, lawyers, public accountants, and merchant banks dealing with the privatisation process;

(c) the bidders and bid prices;

(d) the successful bidders and the reason for selecting such bidders;

(e) the price of shares and any other special conditions of the sale of shares; and

(f) any other matters deemed appropriate.

2. The Agency is required to submit a six monthly report on its activities to the Minister. The Minister must in turn not later than seven days after the first sitting of the National Assembly next, after receipt of the report lay it before the National Assembly.

This report must be published for sale to the public.

3. The Agency is also required at the end of June and at the end of December of each year to submit a report on its activities to the Minister giving details of bids received and reasons for preferring the successful bid.

Similarly this report is also submitted to the National Assembly and is also to be published and sold to the public.

4. Lastly but not the least the Agency holds press briefings, public fora at which members of the public and interested persons are advised on various matters touching on the privatisation programme.

7. CAPITAL MARKETS DEVELOPMENT

The Agency is helping in the development of capital markets in Zambia. In this regard it negotiates with would-be shareholders in some State owned enterprises to reserve some shares for Zambians to purchase. These shares are usually offered to the Zambia Privatisation Trust Fund ( the ZPTF) for onward sale to the public. The ZPTF is Trust Fund established under the Privatisation Act. The trustees are appointed by the Minister of Finance.

8. STATUTORY INSTRUMENTS

The Agency has statutory power to advise the Minister on matters relating to the making of statutory instruments relating to:

(a) sale tender procedures;

(b) public flotation procedures;

(c) pre-qualification and registration of bidders procedures;

(d) public announcement requirements;

(e) tender evaluation procedures;

(f) tender selection procedures;

(g) negotiation guidelines;

(h) final sale monitoring guidelines;

(i) pre and post audit requirements;

(j) any forms for the purpose of the Privatisation Act;

(k) any fees payable in respect of any service provided by the Agency and

(l) such other matters as are necessary or conducive to the better carrying out of the purposes of the Privatisation Act.

From the foregoing matters it can be seen that the Agency is a statutory body created by an Act of Parliament namely the Privatisation Act, Act No. 21 of 1992. By that Act the Agency is given some wide ranging powers to carry out its statutory function of planning, managing, implementing and controlling the privatisation of State Owned Enterprises in Zambia.

The Act as already said provides the Agency with a wide range of powers. To this must be added the fact that the Privatisation Act is not an all embracing Act. This means that the Act does not provide for everything that touches on the privatisation process in the Zambian context. In this respect it may be said that the Act is merely but an enabling Act viz. privatisation. To make the whole process work it is imperative that the privatisation process should be carried out in accordance with the provisions of the laws of the land and indeed the common law.