Understanding Reconstruction of State-Indebted Insolvent Companies Act


The human mind is an incredible, innovative and creative asset that is capable of doing both good and bad.

Building national democratic societies is never an easy task, but what we do know is it is fundamental that such societies are founded and underpinned by a political and economic morality that respects the rule of law and in which the rights of persons and to their property are also respected.

So when Justice minister Patrick Chinamasa invoked Presidential Powers (Temporary Measures) by promulgating Statutory Instrument 187 of 2004 published as a supplement to the Zimbabwean Government Gazette dated September 3 2004, it stands to reason the minds that saw it fit to use emergency powers to deal with the affairs of SMM Holdings Private Limited (SMM) were of the view there was no other instrument to use than to borrow State powers to create a law that did not exist.

In a few weeks, Zimbabwe will celebrate its 32nd birthday and as we reflect on the journey travelled, we will no doubt be compelled to think critically about the past, present and future not only through the eyes and actions of the few privileged to preside over the State, but through our collective inability to take ownership of the future by refusing to be reduced to spectators of history.

It must be obvious to all who live in free societies that any law must be capable of being understood by the people to whom it must apply and, more significantly, it must serve a legitimate purpose.

The real test of any democratic dispensation must surely lie in its ability to submit itself to the dictates of the rule of law and not rule by law.

I have no doubt that the brains behind the law used to deal with my circumstances were not many, but were determined to use any means necessary and available to achieve a desired outcome.

When the minds behind this Act met for the first time, they must have thought hard about the need for the law and what words should be used to justify its use.

The creative minds came up with the title: “Reconstruction of State-Indebted Insolvent Companies Regulations”. Each word used must have been thought of carefully.

By invoking the word “reconstruction”, an impression no doubt needed to be created that jurisdictional facts existed warranting the State to be involved in an unprecedented reconstructive corporate surgery in which the courts were deemed to be incompetent to be involved.

It must have occurred to the minds at work that the only avenue to create a nexus for State intervention was to allege some kind of involvement by the State as a creditor.

No creditor would ideally need the assistance of a law that did not exist at the time when indebtedness was created.

By using the term “State-indebted”, it must have been obvious to the architects of the law that in the minds of the majority the State exists as a contracting power and that such an entity in so far as SMM was concerned could not rely on the laws that existed to protect any legitimate creditor.

In any constitutional democracy, the doctrine of the separation of powers would be relied upon to protect the public against abuse of Presidential powers where the Legislature is independent and autonomous.

Even where the members of the Legislature can be whipped to enact into law regulations that serve no legitimate purpose, one would still look to an independent Judiciary to see through the mischief in laws of this nature.

The fact that the Reconstruction laws belong to a class of laws that should not exist in any democratic society requires no assistance from any person from outer space.

After eight years of the existence of the Reconstruction laws, we must accept that it is not the genius of the few minds that met to give it life, but the silence of the majority.

It is interesting that the minds behind the law saw it fit to borrow the term “insolvency” to mask the true intention.

Firstly, for the law to be applied, a potential victim had to be indebted to the State, but this was deemed to be insufficient to allow the creditor, in this case the State, to intervene.

What was required then was to create the impression that the State by giving itself superior creditor status could unilaterally and arbitrarily classify a victim as insolvent without the involvement of the courts.

The President must no doubt have been informed or misinformed that grounds for State intervention existed with some justification. The President had to be part of the scheme knowingly and unknowingly.

However, because of our past and the limited literacy on corporate civilisation issues, one can understand why wool can be pulled over the eyes of an unsuspecting liberation icon to the extent that the risk of his legacy as a reliable custodian of the kind of morality that is required to secure a prosperous and inclusive society is tarnished.

History will record that a law that does not make sense was passed during the watch of not only the President, but a Legislature that at the material time was incapable of thinking and acting outside the box prescribed by the masters in the Executive.

Democracy normally instils fear in the minds of the mischievous, but when the mischievous are no longer afraid, then one must know that the centre can no longer hold.

The courage to imagine a law that serves no legitimate purpose must be noted, but to then proceed to give life to such an absurdity and get away with it exposes how fragile and weak the post-colonial institutional framework is.

The law in question has no equivalent in any other country in the world and this must say something about the innovative capacity of the minds behind the law.

The inclusive government came into existence in 2009 and after almost three years of existence, one can conclude that there are more pressing issues than focusing on building a new moral, just and equitable foundation informed by real life examples of what not to do in building sustainable democratic societies.

A legitimate question has to be asked on what kind of mind would give life to regulations and laws of this nature.

Who were the people behind the law? It is important that such individuals are brought to the attention of the broader public.

It would be simplistic to imagine that Chinamasa acting alone would have been capable of dreaming up the law and acting on the dream without the active support of not only State but non-State actors.

The fact that the faces and voices of the people behind the law has not been exposed after more than eight years of the existence of the law must be an issue of concern in any country that is trying to escape from an ugly past.

By adding my voice to this issue, it is my hope that other minds will also meet and reflect on how the liberation project can be easily manipulated and undermined.

We have to ask whether it is conceivable that a company can be indebted to the State. Surely being indebted to a State corporation like Zimbabwe Electricity Supply Authority cannot be construed as State indebtedness.

It must be clear to all that a law now exists that permits the State to be the judge unto its own cause.

Yesterday it was SMM; today it is Zimplats where it is being asserted by the Zimbabwe Revenue Authority that the company owes $28 million in royalties which exposes the company to be reconstructed in the event that the funds are not paid as demanded.

Mutumwa Mawere is a businessman based in South Africa. He writes in his personal capacity.


  1. I totally agree with the writer of the artcle the whole reconstruction law is not in line with any other laws of reconstruction world wide.zimbabwe is the only country which does not sbscribe insol international which is a world body which countries subscribe to and get guidence in terms of having insolvency and reconstruction laws that at least assist member countries in cross border insolvency matter which keeps the world economy in balance to avoid rescession.recons law was a brain child of gono chinamasa who made their pockets fat out of it.

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