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BSR - Gumbo and Conflicts of Interest

October 17, 2018

 

The scandalous matter involving a Zimbabwean Cabinet Minister Joram Gumbo, as reported in The Herald presents a classic case of conflicts of interest which the constitution prohibits. The available facts, as presented by the state newspaper, are as follows:

 

  • A company called JMCD was awarded a lucrative contract to supply clothing material to ZINARA, a parastatal established under statute

 

  • JMCD is a family-owned company in which Gumbo and his wife are directors and shareholders

 

  • ZINARA falls under the Ministry of Transport and Infrastructure Development where Gumbo was Minister before he was transferred to another Ministry

 

  • Gumbo says his hands are clean and his family company’s contractual engagements have nothing to do with him as an individual. He is using the corporate veil as a shield and to separate himself from the company. He argues that the company won the tender in a competitive process and adds that it supplies other government departments, including the Ministry of Health and the national army

 

  • How does Gumbo’s explanation stand in light of the country’s constitution and legislation?

 

Constitution and Conflicts of Interest

 

The Constitution of Zimbabwe is designed to prevent and penalise conflicts of interests by Ministers and other public officers. The framers of the constitution were conscious of the risk that by virtue of their positions of power, Ministers and public officers could be exposed to conflicts of interest with the State which they are required to serve.

 

Conflicts of interest happen when a person’s private interests compete with the interests of principal they are supposed to serve. Such conflicts have the potential to undermine the interests of the principal, as the person tends to prioritise his own interests.

 

The law on conflicts of interest is designed to minimise the moral hazard which arises from a relationship between a principal and agent. When someone entrusts another to act on their behalf, it creates a principal-agent relationship. The principal relies on the agent to act in his best interests. However, since the agent has access to information about and opportunities around the principal, he is in a powerful position that can be easily abused. The danger in such cases is that the agent might end up putting his own interests ahead of the principal’s. These are also referred to as agency costs.

 

Duty to Avoid Conflicts of Interest

 

The law is meant to minimise the risks of conflicts of interest in such situations. It does this by prohibiting agents’ exposure to and actual conflicts of interest. It imposes a duty to avoid conflicts of interest. It also penalises agents who advance their own interests at the expense of the principal. This duty is based on the general duty of good faith. The law requires the agent to exercise good faith towards his principal.

 

This is particularly important where the principal is an artificial body such as a company or other corporate organisation. In the case of our constitution, we extended this duty to the relationship between the State and Ministers and public officers, because the State is also an artificial creation. The common denominator between artificial bodies like companies and the state is that they rely on humans for their operations. But they are also at risk because humans are motivated by self-interest. It is easy for humans to look after their personal interests ahead of their official duties. A director of a company might divert a contract that is meant for the company. He might use company property for personal profit.

 

Conflicts of interest are also prohibited because they are unfair on competitors for the same opportunities. An insider has access to privileged information which competitors do not have. An insider may also have influence over decision-makers which external competitors do not have. Insiders would almost always take advantage of their vantage position to the disadvantage of their competitors. It is important therefore, in the interests of fairness, to take a tough stance towards conflicts of interest.

 

Constitutional Provisions

 

There are specific provisions which address the issue of conflicts of interests. This is why the law requires agents/insiders to declare their personal interests in any matter that involves opportunities from or due to their principal. Company law demands a return of secret profits earned by a director by virtue of conflicts of interest.

 

In framing our constitution, we adapted these rules on conflicts of interest to apply them to the situation of Ministers and public officers. The first of these is section 106(2) of the Constitution which states as follows:

 

“2. Vice-Presidents, Ministers and Deputy Ministers may not, during their tenure of office

 

b. act in any way that is inconsistent with their office, or expose themselves to any situation involving the risk of a conflict between their official responsibilities and private interests; or

 

c. use their position, or any information entrusted to them, to enrich themselves or improperly benefit any other person.”

 

These provisions were designed to prevent conflicts of interest by Vice Presidents, Ministers and Deputy Ministers (hereafter collectively referred to as "Ministers"). There are two critical parts which apply to the Gumbo situation.

 

1. Prohibition of exposure to conflicts of interest

 

First, the provision does not allow Ministers “to expose themselves to any situation involving the risk of a conflict between their official responsibilities and private interests”. The question that has to be asked is: whether a Minister has placed himself in a situation in which he is exposed to the risk of conflict of interest between his public duties and personal interests?

 

The test in this case is mere exposure to a situation that presents the risk of a conflict of interest. There is no need to demonstrate actual conflict. Mere exposure to the risk of a conflict is enough to trigger a breach of this provision. In the case, of Gumbo it has to be asked:

 

Is this a situation that exposed the Minister to the risk of a conflict between his official responsibilities and his private interests?

 

It is hard to see a situation which is more conflictual. Gumbo’s family company got a contract from a parastatal which falls under the parent Ministry which he was running. There is a strong case that he exposed himself to a situation presenting a conflict of interest. He may protest, as he is doing, that there is no actual conflict, but it’s harder for him to claim that he did not expose himself to a situation involving the risk of a conflict of interest.

 

Misuse of position or information

 

The second is that a VP, Minister or Deputy Minister is not allowed to “use their position, or any information entrusted to them, to enrich themselves or improperly benefit any other person.” This prohibition is also based on the duty of good faith, since a Minister has access to privileged information, which they could easily use to advance their own interests ahead of those of the State and others.

 

Is there a possibility that Gumbo used his position or information gained from his role as Minister of Transport to benefit his family company, wife and himself? This depends on the evidence. However, the fact that he had access to information and clearly had influence in the parastatal which fell under his Ministry gives rise to serious concerns over misuse of these privileges.

 

Criminal Abuse of Office

 

Finally, apart from the constitutional provisions that prohibit conflicts of interest, there are also criminal statutes which penalise criminal abuse of office. They include the Criminal Law (Codification) Act and the Prevention of Corruption Act whose provisions have been used in recent months. In this matter, there is a prima facie case to investigate whether criminal abuse of office may have been committed.

 

Conclusion

 

In conclusion, it is clear that the constitution prohibits conflicts of interest by Ministers. This is meant to protect the State and to ensure that Minister act in good faith. There is a bad culture of Minister and public officers using corporate vehicles and associates to engage in business with the State or its entities, often at great expense to the taxpayers and other commercial players.

 

There is a strong case that the Minister is in breach of section 106(2) of the Constitution and legislation which prohibits criminal abuse of office. This is an important test for President Mnangagwa who has made anti-corruption one of the key promises of his administration. He even set up a controversial unit in his office ostensibly to enhance the fight against corruption. But while there have been some high profile arrests in recent months, critics have argued that they have targeted political elites who have fallen out of favour with the Mnangagwa regime. Mnangagwa’s current allies who are suspected of corruption have been spared.

 

Gumbo is one of Mnangagwa’s long-standing allies. He survived the Zimbabwe Airways and Snow-graders scandals and was moved to the Ministry of Energy and Power Development in the new Cabinet. But the ghosts of the past have returned to haunt him. The question is: can Mnangagwa ignore the apparent conflicts of interest involving an ally or will he live up to his pledge and go after one of his staunch allies? It’s a big test.

 

WaMagaisa

wamagaisa@me.com

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