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10. March 2008

Zimbabwe approves law indigenising foreign-owned companies

President Robert Mugabe has signed into law the controversial Indigenisation and Economic Empowerment Bill, paving

the law for local Zimbabweans to take controlling stakes in mines and banks.

This week promises to be shadowy for most businesses operating in Zimbabwe, with a dark cloud hanging over their

interests, after its leader, President Robert Mugabe, approved a law compelling companies to cede 51% of their

equities to locals.

The controversial Indigenisation and Economic Empowerment Bill, mooted last year in what the government said would

afford Zimbabweans an opportunity to improve their living standards by economically empowering them, became law on

Friday last week, a government newspaper reported on Sunday, citing a notice published in the Government Gazette on

Friday last week.

The 84-year-old Mugabe is seeking another term - after ruling Zimbabwe for 28 years - in a general election

scheduled for later this month. The law paves the way for locals to take majority control of foreign companies,

including mines and banks.

"President Mugabe has assented to the Indigenisation and Economic Empowerment Bill, paving the way for the

indigenisation of Zimbabwe's economy and the economic empowerment of the country's indigenous citizens," the Sunday

Mail said.

It added: " According to the law, indigenous Zimbabweans shall own at least 51% of the shares of every public

company and other businesses. It specifies that no restructuring, merger or demerger shall be approved unless

indigenous Zimbabweans hold 51 percent shares in the resultant business.

"The said beneficiaries should also be equitably represented in the business. No projected or proposed investment in

a prescribed sector of the economy shall be approved unless a controlling interest in the investment is reserved for

locals."

It however said this provision was subject to "temporary prescriptions that may see the Minister of State for

Indigenisation and Empowerment altering the share allotment".

Under the law, all government departments, statutory bodies and local authorities and all companies would be

mandated to procure 51% of their services from companies whose controlling interest is held by locals.

"Where goods and services are procured in terms of the Procurement Act from businesses in which a controlling

interest is not held by indigenous Zimbabweans, any subcontracting required to be done by the supplier shall be

done, to the prescribed extent, in favour of businesses in which a controlling interest is held by indigenous

Zimbabweans," the weekly said, citing a clause in the new Act.

Impala Platinum Holdings Ltd. and Aquarius Platinum Ltd. mine for platinum in Zimbabwe, while Rio Tinto Group

controls a diamond mine. Standard Chartered Plc and Barclays Plc operate chains of banking branches across the

country. The country is second to South Africa in having large reserves of platinum and chrome.

Mining and business industry officials have warned the law could quicken the decline of Zimbabwe's economy, sounding

its death knell in the face of foreign investor flight - that has seen it shrinking by at least 30% since 1999 - and

an inflation rate of over 100,000% - the world's highest.

Critics of Mugabe accuse his government of plunging Zimbabwe into turmoil through the 2000 move of seizing

white-owned farms and handing them to inexperienced black farmers.

Even the country's central bank governor Gideon Gono warned last year that a fine balance should be struck between

the objectives of indigenisation and the need to attract foreign investment.

But Mugabe has long remained indifferent to the root cause of the problems dogging his country's economy. At a

campaign rally early last week, Mugabe blamed the economic woes on foreign companies, especially ‘white-owned mining

companies', which he said were smuggling precious minerals out of the country. As a result, he said, gold annual

tonnage had fallen from 27 tonnes to 17 tonnes and expected it to further slide to 11 tonnes.

"In a country rated as having gold resources and deposits in large quantities, it is a shame. We need to have an

inspectorate that is effective. We must capacitate our people in that area. It is in these areas that we have people

we don't trust," he was quoted in media reports.

"It's not just the blacks. The blacks are the workers. The whites are the ones doing the externalisation and

sabotage of our economy. It's important that our minerals become ours. We are getting practically little from

precious minerals. There are those who say we will scare away investors but we are already losing," he added.

Zimbabwe's minister of indigenisation and economic empowerment, Paul Mangwana is also on record as having told

foreign companies unwilling to comply with the indigenisation law that they "can pack and go".

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