Page last updated at 11:01 GMT, Monday, 1 March 2010

Zimbabwe law on firms' ownership comes into effect

Branch of Barclays bank in Hararre
Foreign firms will have five years to comply with the new rule

A new Zimbabwean law that forces companies to sell a majority stake in their businesses to indigenous people has come into effect.

Firms worth more than $500,000 (£332,000) run by non-indigenous people have five years to sell a 51% stake, upon the threat of jail sentences.

Harare-based economist John Robertson told the BBC's Network Africa programme that it was "a very bad idea".

He said it would only deter further badly-needed foreign investment.

"The government appears to have no wish at all to make the country attractive to the [overseas] investors," said Mr Robertson.

Government split

The new rule - dubbed the indigenisation law - is seen as an extension of the government's seizure of white-owned farms, which started approximately 10 years ago.

This law could create fears that the process could be chaotic, just like the land reform, which will affect the economic recovery of the country and we do not need this right now as we need investments
CTU president Lovemore Matombo

That controversial programme was widely considered a failure, as many of the seized farms have remained dormant.

This resulted in Zimbabwe - once known as the bread basket of Africa - having to become a net importer of food, sparking hyper inflation.

The law on company ownership has further divided Zimbabwe's already strained unity government.

President Robert Mugabe has repeatedly defended the law, saying that firms would be "foolish" not to comply.

By contrast, Prime Minister Morgan Tsvangirai, has rejected the law, saying it was published without due process.

Investment 'needed'

Mr Robertson added that it was likely to have the same negative impact as the farm seizures.

"As soon as the skills are taken away from the businesses they now have their eye on, those businesses will also fail," he said.

He added that far from empowering the wider population, the move would only benefit those individuals that the government appoints to take control of the companies.

The main trade union group, the Zimbabwe Congress of Trade Unions (ZCTU), has also warned that the new law could have negative consequences.

"Although the principle of the law is good, we fear that this could lead to a creation of new minority blacks who will just replace the minority whites," said ZCTU president Lovemore Matombo.

"The law should have not been rushed, we are just coming out of a self-inflicted economic crisis.

"This law could create fears that the process could be chaotic, just like the land reform, which will affect the economic recovery of the country and we do not need this right now as we need investments."


A previous version of this story referred to "foreign-owned" companies being affected by the law, however this has now been amended to reflect the fact that the law applies to all firms controlled by non-indigenous Zimbabweans.



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