/ 27 September 2011

Zim to probe foreign firms over ownership law

Zimbabwe will soon probe foreign-owned firms to establish their level of compliance with a law requiring them to sell at least a 51% shareholding in their Zimbabwean operations to locals, an official said on Tuesday.

The heavily criticised law is aimed mainly at mining firms and banks operating in a resource-rich state that has become an economic basket case because of what analysts say are years of mismanagement by President Robert Mugabe’s government.

Critics see the law as a way for the government to squeeze cash out of foreign firms in Zimbabwe and say the money will go to top officials, not to ordinary people, who rank among the poorest in the world.

The ministry charged with enforcing the law will team up with police to conduct the investigations, Wilson Gwatiringa, chief executive of the body set up to advise the government on implementing the law, told reporters.

“The board is aware that many non-indigenous companies have not complied with the indigenisation law as they are reluctant to submit their plans for approval,” Gwatiringa said.

Foreign firms deemed non-compliant could be fined or have their operating licences cancelled.

Empowerment Minister Saviour Kasukuwere gave the mining industry until September 30 to turn over majority stakes to locals or face asset seizures. But that deadline is set to pass without incident as the authorities are in ownership talks with mining firms.

The world’s leading platinum producer, Anglo American Platinum, number two producer Impala Platinum and Rio Tinto, which operates a diamond mine, are some of the major foreign mining firms with assets in Zimbabwe.

“Rather than a standardised process, the implementation of the law is driven by rent-seeking,” said political risk consultancy Africa specialist Anne Fruhauf.

A major reason for the law is to allow Mugabe’s Zanu-PF party to build up a war chest ahead of national elections that could come as early as next year, she said.

Critics say Zimbabwe, which is emerging from a decade-long slump during which its economy contracted by as much as 50%, has no capacity to raise the funds needed to take over the mining assets.

Mugabe was forced to share power with his rival Morgan Tsvangirai, now prime minister, two years ago after disputed elections in 2008. The two have sharp differences over the ownership policy, which Tsvangirai says threatens Zimbabwe’s economic recovery. — Reuters