Foreign firms operating in Zimbabwe will be required to give majority control to black Zimbabweans under a nationalisation law signed by President Robert Mugabe yesterday.
More than 70 British firms that have invested in Zimbabwe, including Lever Brothers, Barclays Bank, Standard Chartered Bank, BP, Rio Tinto, Merchant Bank of Central Africa and several enterprises owned by Anglo American Corporation, are among those likely to be hit by the new law unless they can persuade the government to halt its implementation.
But fighting a crunch presidential election in three weeks' time, and eager to maintain the support of his cronies in the state security apparatus, Mr Mugabe is unlikely to back down on his new "empowerment" drive.
"It's a catastrophe," said Eddie Cross, an economist and former leader of the Confederation of Zimbabwe Industries. "This is totally unacceptable and many large foreign firms badly needed for economic revival in this country are simply going to abandon their businesses."
Zimbabwean government sources said Mr Mugabe rushed to sign the Economic Empowerment Act at the weekend because he was fearful that he could lose a huge chunk of his backers to the former finance minister, Simba Makoni, who is challenging him in the forthcoming presidential elections. In tandem with the new ownership rules, the new law confers ownership of tractors, generators, fuel and livestock seized from white farms on new black owners.
Dr Makoni, who has been excluded from state radio and television since he announced his challenge, is believed to enjoy significant backing from within Mr Mugabe's ruling Zanu PF and parts of the military, although few have come out to publicly declare their support, fearing reprisals.
"Since there are no farms left to seize for redistribution, the foreign firms offered him [Mugabe] the best prospects for patronage," said a senior Zanu PF official, who remains in the ruling party but is secretly supporting Dr Makoni.
The Zimbabwean president unleashed his campaign of occupying and seizing white-owned farms in 2000, when he faced parliamentary elections. The land-grab has brought about the collapse of the country's commercial agriculture sector, once the economic mainstay of Zimbabwe and much of the southern African region. Official inflation has climbed to 100,000 per cent and unemployment to 85 per cent.
More than three million Zimbabweans, a third of the population, have fled. The Zimbabwean dollar, which was stronger than the US dollar and equal in value to the British pound when Ian Smith handed over the country to Mr Mugabe in 1980, is worthless. About 55 million Zimbabwean dollars will now buy a pound.
But analysts believe that the new law, the Indigenisation and Economic Empowerment Bill, crushes any prospect of economic recovery. "The only way out for Zimbabwe now is the removal of Mugabe's regime on 29 March and its replacement with a government that will introduce new sensible business arrangements," said one bank economist.
According to the new Act, indigenous black Zimbabweans will own at least 51 per cent of the shares of every public company and other business. No restructuring, merger or de-merger can be approved unless indigenous Zimbabweans hold 51 per cent of shares in the resultant business. No projected or proposed investment in a prescribed sector of the economy will be approved unless a controlling interest is reserved.
Financing arrangements for the majority equities are as good as requiring foreign firms to give their equity for free, said Mr Cross.Reuse content