Zimbabwe's fragile recovery could be undermined by a new local ownership law that economists say will frighten off desperately needed foreign investment. Under the law, which took effect Monday, foreign companies valued at more than 500,000 US dollars must divest 51 percent of their shares to non-white locals within five years.
They have 45 days to report their efforts at complying with the rule. The biggest targets include local subsidiaries of British banks Barclays and Standard Chartered, as well as mining companies such as Impala Platinum, AngloPlatinum, and Rio Tinto.
"For foreign investors, this is a severe warning that this is not the country you can invest in at the moment," said Tony Hawkins, professor at the University of Zimbabwe's school of business.
"The so-called unity government is deeply split over the regulations and there is a lot of uncertainty about what shape they are going to take," he added.
Industry Minister Welshman Ncube said Wednesday that the cabinet would review the law, but that does not suspend the measures, which have sharply divided what is an already strained unity government.
His Movement for Democratic Change (MDC) accused President Robert Mugabe's ZANU-PF party of trying to cash in on foreign business. "ZANU-PF simply wants to create a new arena for looting and abuse," the MDC said, saying the measure would only benefit "the well-connected elite and the ZANU-PF chefs."
The Zimbabwe Congress of Trade Unions, the main labour body, also voiced fear that the law "could lead to a creation of new minority blacks who will just replace the minority whites (who owned the business previously)."
"Our indigenisation programme, like the land reform programme, is designed to correct historical imbalances in the ownership of our resources," Mugabe said last weekend. Those remarks did little to reassure investors. Since 2000, most white-owned farms in Zimbabwe have been forcibly resettled by Mugabe supporters in a violent and politically charged campaign.
Farm production, once the backbone of the economy, has plunged. Mining, which become Zimbabwe's main production sector, now appears to be in the firing line. Since the law was published one month ago, Zimbabwe's stock market has tumbled about 10 percent, while mining shares have plunged 20 percent. Foreign companies already have headaches working in Zimbabwe. Food giant Nestle briefly suspended operations in December over a dispute about buying milk from Mugabe's family farm. South African retailer Shoprite backed out of a possible deal to buy Zimbabwe's OK Bazaars for reasons never made public.
After a decade of economic collapse, marked by world-record hyperinflation that ended only one year ago, most Zimbabweans are struggling to survive.
Comments
Comments are closed.