By Peter Greste
BBC News, Johannesburg
Zimbabwe's government has published new legislation that would force mining firms to transfer a majority shareholding to local owners.
Mr Mugabe says the population should benefit directly from mining
That will include giving the government a free 25% stake.
The legislation is expected to be presented before parliament before the end of the year.
Economists warn that if the mines and minerals amendment bill is passed, it will halt any new investment in Zimbabwe's mining industry.
Ever since the government in Harare passed legislation earlier this year, forcing foreign-owned companies to sell a majority share to Zimbabweans, the mining industry knew it would have eventually have to comply.
But what has alarmed industry insiders is a provision in the draft law that says 25% of the shares must be given to the government for free.
The remaining 26% of the country's share must also be paid for with future earnings.
The government has long argued that because foreign companies are exploiting the country's natural resources, Zimbabweans must benefit directly.
But independent economists, such as John Robertson, say the move will effectively halt any development of new mines.
It will also ultimately severely damage the one industry that is still bringing in significant amounts of foreign currency, he says.
The government already takes income from the mining sector in the form of royalties and taxes, so why would you invest 100% of the capital, Mr Robertson asks, if you are only going to get 49% of the returns.
According to the Chamber of Mines, there are 22 mining companies in Zimbabwe, of which 10 are foreign-owned.
The Department of Mines could not be reached for comment.