THE
LABOUR LAW PERSPECTIVES ON THE SPECIAL ECONOMIC ZONES (SEZs) BILL, (HB
15/2015): A DELICATE BALANCING EXERCISE
BY CEPHAS MAVHONDO*
A
certain WhatsApp group was created and is called Labour Solutions Centre. I am a member thereof. The Group
Administrator asked me to comment on an animal called Special Economic Zones visa vis our labour laws. After
commenting on the aforementioned animal, I thought of coming up with this
article for the benefit of the general members of the public.
Zimbabwe is currently in the process of
passing into law what is named Special Economic Zones Act. This process is at
Bill stage and the Bill number is HB 15/2015. A number of questions are being
asked. In the realm of labour, the biggest question is;- ‘Is the bill not an attack on
labour rights of the employees?’ The other question is ‘If
the answer to the first question, is in the affirmative, what can be done to
make sure that the resultant law is a good law? I attempted to answer
these and other questions in this article.
The
preamble to the Bill states that:
“AN ACT to provide for the establishment of
the Zimbabwe Special Economic Zones Authority and to provide for the functions
thereof; to provide for the constitution and functions of the Special Economic
Zones Board; to provide for the establishment of Special Economic Zones and the
administration, control, regulatory measures and incentives in connection
therewith; and to provide for matters incidental to or connected with the
foregoing”
In
essence, if the Bill is passed into law, there will be the Zimbabwe Special
Economic Zones Authority (which will be a body corporate), Special Economic
Zones Board (which shall be responsible for controlling and managing the
Special Economic Zones Authority) and Special Economic Zones (that
is, as defined in the Bill, any part of Zimbabwe declared in terms of section
20(1) of the Bill to be a special economic zone).
It is important to note that
section 2 of the Bill defines ‘special economic zones’ as ‘any part of Zimbabwe declared in terms of
section 20(1) (of the Bill) to be a special economic zone’. This definition
only tells us that these zones are areas declared as special economic zones. It
does not also clearly highlight to us what is economically special about these areas or zones.
SEZs can be generally defined as
geographical zones which enjoy special regulatory and institutional incentives
which distinguish them from the rest of the country. They normally provide an
array of incentives for businesses which incentives range from tax incentives
to regulatory incentives. SEZs are therefore designated geographical regions
where enterprises can be established operating under special regulations; the
zones are intended to enhance competitiveness and job creation and promote
foreign direct investment in a country. SEZs
are a way to encourage exports and foreign exchange earnings while addressing
the massive unemployment rate, broadening the economic base and attracting
development and new technologies.
Special
Economic Zones may be sector-specific or multi-product and the following
categories of SEZs have been defined as per the South African SEZ Act No. 16 of
2014:
- "Industrial
Development Zone"
means a purpose built industrial estate that leverages domestic and
foreign fixed direct investment in value-added and export-oriented
manufacturing industries and services;
- "Free
Port"
means a duty free area adjacent to a port of entry where imported goods
may be unloaded for value-adding activities within the Special Economic
Zone for storage, repackaging or processing, subject to customs import
procedures;
- "Free
Trade Zone"
means a duty free area offering storage and distribution facilities for
value-adding activities within the Special Economic Zone for subsequent
export;
- "Sector
Development Zone"
means a zone focused on the development of a specific sector or industry
through the facilitation of general or specific industrial infrastructure,
incentives, technical and business services primarily for the export
market
Now
that I have addressed what are SEZs, I think it is important to look at their
history in Zimbabwe. At first, SEZs were established under the Income Tax Act;
they were then called Export Processing Zones [EPZs]. Exporters who operated
within them were given tax exemptions but otherwise they enjoyed, no special
exemptions from the ordinary laws of Zimbabwe. Later on, in 1995, the Export
Processing Zones Act (Chapter 14:07) (herein after called ‘the repealed law’)
was promulgated and it established a parastatal authority responsible for
establishing export processing zones, attracting investment to the zones and
issuing licenses for businesses to operate within the zones. Section 56 of the
repealed law stated, in almost the same manner the proposed section 56 of the Bill
is drafted, that the Labour Relations Act
[now the Labour Act] would not apply within export processing zones; but
this section was repealed in December 2005. In 2007 the Export Processing Zones
Act was repealed by the Zimbabwe Investment Authority Act, though industries that
were licensed to operate in the zones continued to enjoy certain tax
advantages.
It
is believed that what may have reduced the effectiveness of the repealed law
was that, any premises or place could be declared an export processing zone;
even single rooms could be so declared. Virtually any manufacturing business
which was export-oriented to at least some degree could get a license under the
repealed law and many did. They did not have to move to a special zone to get
the tax benefits accorded to them under the repealed law, but could remain
where they were. Hence the repealed law did not lead to the establishment of
separate zones where export businesses were concentrated: exporters were
dispersed as before, but enjoyed tax exemptions. Nevertheless, the repealed law
did encourage economic development as it is believed that projects in export
processing zones had created more jobs in 2004.
The Bill is almost a mirror effect of the
repealed law (Export
Processing Zones Act (Chapter 14:07)). Section
56 of the repealed law stated that:
“56
Chapter 28:01 not to apply
(1)
The Labour Relations Act [Chapter 28:01] shall not apply in relation to
licensed investors operating and employees employed in an export processing
zone.
(2)
The Authority may, in consultation with the Minister responsible for the administration
of the Labour Relations Act [Chapter 28:01] provide rules for conditions of
service, termination of service, dismissal from service and disciplinary proceedings
that apply in export processing zones”.
Section 56 of the Bill
provides that;
1)
The
Labour Act (Chapter 28:01) and the Indigenization and Economic Empowerment Act (Chapter
14:33) shall not apply in relation to licensed investors operating in a special
economic zone.
2)
The
Authority may, in consultation with the Minister responsible for the
administration of the Labour Act (Chapter 28:01), provide rules for conditions
of service, termination of service, dismissal from service and disciplinary
proceedings that apply within every special economic zone.
It is clear that in terms of
section 56 (1) of the Bill ‘licensed investors’ operating in Special Economic
Zones will be exempted from the provisions of two key legislations;
Indigenisation and Economic Empowerment Act and Labour Act. It is worth
noting that, unlike the repealed law, section 56 (1) of the Bill does not
expressly cover the employees of the licensed investors. However, given the
nature of the employer–employee relationship which is reciprocal, the exemption
of the employer from the application of the proposed law means that the
employee is also exempted. This is also
confirmed by the fact that the Bill proposes that the SEZ Authority, in
consultation with the Minister responsible for administration of the Labour Act
may provide rules for conditions of service, termination of contract,
dismissal from service and disciplinary hearing in SEZs.
The Zimbabwe Congress of Trade Unions (ZCTU) has argued
that exempting companies that will operate in SEZs from the Labour Act is
ill-advised and will lead to workers being subjected to unfair treatment.
To alley any fears of abuse of labour rights in SEZs, I
am of the view that the word “may” in section 56(2) of the Bill must be changed
to “shall”. In line with that view, section 56(2) of the Bill ought to be clear
that the rules in question shall apply in SEZs. This has the effect of making
it mandatory that the SEZs Authority makes the necessary rules and the
application of the rules in SEZs becomes mandatory.
If the suggested changes are not made, by virtue of the
use of the word ‘may’ in section 56 (1) of the Bill, the Authority remains with
a discretion whether to make the rules or not. This is really not good for the
employers and employees as it may take long before an election to make the
rules is made. It will be worse, if the election is not to make the rules. If
the rules are not made, it means the laws of the jungle will apply between the
employer and employee in SEZs. On
that basis there is a possibility that the establishment of SEZs may lead to
labour rights violations such as minimum wages, or standard working hours, or
the right to strike, or to form trade unions.
Another
point to note is that the exclusion of the application of the Labour Act in SEZs
may be or may not be constitutional. This
is so because section 86 of the Constitution
of Zimbabwe authorizes the limitation of constitutional rights and freedoms.
However, the limitation must be only in terms of a law of
general application ( that is a law that applies to everybody and not only to
certain subjects) and to the extent that the limitation is fair, reasonable,
necessary and justifiable in a democratic society based on openness, justice,
human dignity, equality and freedom, taking into account all relevant factors.
There is a list of certain rights that the aforesaid section 86 makes immune
from limitation but labour rights are not part of the list. This means labour
rights provided for in section 65 of the Constitution can be limited in terms
of section 86 as long as the limitation is in terms of a law of general
application and to the extent that the limitation is fair, reasonable,
necessary and justifiable in a democratic society based on openness, justice,
human dignity, equality and freedom, taking into account all relevant factors. The only question I will leave
open for another day is: Is the proposed
limitation (section 56 of the Bill) in terms of a law of general application (that
is a law that applies to everybody and not only to certain subjects) and to the
extent that the limitation is fair, reasonable, necessary and justifiable in a
democratic society based on openness, justice, human dignity, equality and
freedom, taking into account all relevant factors?
Sections
65 of the Constitution which provides for labour rights states that;
65
Labour rights
(1) Every person has the right to fair
and safe labour practices and standards and to be paid a fair and reasonable
wage.
(2) Except for members of the security
services, every person has the right to form and join trade unions and employee
or employers’ organizations of their choice, and to participate in the lawful
activities of those unions and organizations.
(3) Except for members of the security
services, every employee has the right to participate in collective job action,
including the right to strike, sit in, withdraw their labour and to take other
similar concerted action, but a law may restrict the exercise of this right in
order to maintain essential services.
(4) Every employee is entitled to just,
equitable and satisfactory conditions of work.
(5) Except for members of the security
services, every employee, employer, trade union, and employee or employer’s
organisation has the right to—
(a)
engage in collective bargaining;
(b)
organize; and
(c)
form and join federations of such unions and organizations.
(6) Women and men have a right to equal
remuneration for similar work.
(7) Women employees have a right to
fully paid maternity leave for a period of at least three months.
It is also important to look at the perceived
advantages and disadvantages of SEZs especially in relation to the development
of labour law.
As an advantage, labour conditions may be regulated
less rigidly in SEZs through amendments of the labour laws. This may encourage businesses within SEZs to increase employment since
the costs of shedding unproductive labour will be reduced. Also there may be
development of labour laws since they will be repealed to match the needs of
Special Economic Zone hence rapid economic growth in the country. Also this
will eventually lead to the establishment of courts and other tribunals capable
of enforcing rights of workers at the work place in the zones. The regulatory
regime may be clear and secure. Investors will be able to settle their legal
disputes quickly and fairly, and will be confident that the Government will
protect their rights, particularly their property rights, and will not change
the rules arbitrarily.
As
a disadvantage, there may be a tendency for labour conditions to be regulated
less rigidly to suit the demands of SEZs. As noted earlier, our SEZs Bill
stated specifically that the Labour Act would not apply within Special Economic
Zones. This may also lead to the unjustified exploitation of workers and unsafe
conditions of work in the zones.
In
a nut shell, the creation of SEZs and limiting labour rights in SEZs is a very
delicate balancing exercise which requires serious considerations and the involvement
of all the concerned stakeholders for the betterment of our country.
* Cephas Mavhondo is a labour lawyer
and partner at Mhishi Legal Practice, Harare. For any feedback: cephasmavhondo@gmail.com. This
article expresses the views of the writer. It is meant to goad a discussion on
issues raised and it does not constitute legal advice to any reader thereof and
the writer will not be
responsible for any action or omission done based on this paper. For more
information visit www.labourwatchzim.blogspot.com
