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27 Sep 2007 16:19
Foreign-owned companies in Zimbabwe said on Thursday they were assessing the likely effects on their business of a new law forcing them to give local owners majority holdings.
The Empowerment Bill, pushed through Parliament by the government on Wednesday, will give Zimbabweans a 51% stake in foreign firms, including the important mining and banking sectors.
More than 300 foreign-owned businesses are still operating in Zimbabwe and the legislation raised concerns that investment might dry up.
Some feared a repetition of government seizures of white-owned farms in 2000 to redistribute among inexperienced indigenous black farmers, a controversial move that economic analysts say led to the current economic crisis.
Analysts said foreign businesses had scaled down or written off their local interests, but mining companies were still exposed.
These included the world’s two largest platinum producers, Anglo Platinum and Impala Platinum (Implats).
“As far as we are concerned we have agreements in place and these will be taken into account when looking at the overall compliance,” David Brown, chief executive of Implats, told Reuters in an email reply to questions.
London-listed Old Mutual and South Africa’s Standard Bank, which has a 14-branch network in Zimbabwe, said they were still studying how the Bill would affect their businesses.
“We are still reviewing the legislation and the process by which it will be implemented,” Standard Bank spokesperson Ross Linstrom said.
It was not clear how the Bill would be implemented.
“There is no clarity at all and this will put a further damper on the economy, especially with the view that it is a political gimmick,” Sheunesu Juru, a fund manager at Zimnat Insurance, said.
Some foreign investors fled after the land seizures. Others stayed behind, hoping to ride out an economic storm in what was once one of Africa’s most prosperous countries.
Senior officials have said the government will honour agreements made with foreign investors.
Indigenisation and Economic Empowerment Minister Paul Mangwana said the process would be gradual.
“We may start with 20%, move on to 25% or to 40% depending on the sector,” he told Parliament on Wednesday.
“We will allow them time to indigenise.
We have to look at each business in its own right.”
However, uncertainty was growing as the unpredictable President Robert Mugabe tightened his grip on power and the economy edged towards collapse.
“What this [law] does is worsen the investment climate, and the perception of Zimbabwe has not been good for a while now,” Best Doroh, an economist at ZB Financial Holdings, said.
“The timing—certainly from an investment point of view, is wrong—although from a political standpoint it would appear designed for next year’s election.”
That view was shared by the main opposition Movement for Democratic Change (MDC), which alleges that the Bill is designed to enrich Mugabe’s supporters before presidential and parliamentary elections next year.
Mugabe, in power since independence from Britain in 1980, has branded some foreign businesses “serpents”, accusing them of raising prices and stashing foreign earnings abroad as part of a wider Western plot to remove him from power.
He faces little resistance from a weak opposition, but opponents and his Western critics hope the economic meltdown will increase pressure on the defiant leader.
Zimbabweans have been increasingly frustrated as they struggle to cope with the world’s highest inflation, officially put at about 6 600%, as well as food, fuel and foreign currency shortages.
Mugabe, who denies allegations of widespread human rights abuses, has made it clear that dissent will not be tolerated.—Reuters
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