Page last updated at 09:17 GMT, Thursday, 15 April 2010 10:17 UK

Zimbabwe President Mugabe denies company law U-turn

Zimbabwe President Robert Mugabe
Mr Mugabe contradicted Prime Minister Tsvangirai's statement

Zimbabwean President Robert Mugabe has denied that a controversial Zimbabwean law is to be shelved.

Mr Mugabe's comments contradict the Prime Minister, Morgan Tsvangirai -reflecting the rift in the uneasy coalition government.

The rules, which force companies valued at more than $500,000 (£324,000) to be majority-owned by "indigenous" people, were issued on 1 March.

This effectively ruled out ownership by white Zimbabweans or foreign firms.

Rift

President Mugabe said reports that the "indigenisation law" would be suspended were "completely false", and instead a cabinet committee was merely studying the law to improve it.

Indigenisation Minister Saviour Kasukuwere, a fellow member of the president's Zanu-PF party, also confirmed the law was going ahead.

Prime Minister Tsvangirai's office had said the rules were now "null and void" pending further consultations.

The apparent dispute highlights the continuing rift in Zimbabwe's coalition government between Mr Mugabe's Zanu-PF party and Mr Tsvangirai's Movement for Democratic Change.

The two parties have been in coalition together since February last year, under a governing agreement that ended decades of rule by Zanu-PF and that brought to an end political violence around the 2008 presidential election.

The country's stock market has fallen by 10% since the law's introduction, with mining shares losing 20%.

Analysts said the law had served to deter much-needed foreign investment in the country.

"A lot of concerns have been raised by a number of companies in the mining, manufacturing and tourism sector that the regulations would scare away potential investors," Zimbabwean journalist Brian Hungwe told the BBC.

Even so, he said the move to repeal the law came as a "huge surprise" after President Robert Mugabe had recently defended the law and said it would not be reversed.

Prime Minister Morgan Tsvangirai has repeatedly criticised the law.

Bread basket

Under the so-called indigenisation law, companies owned by non-indigenous people were given five years to sell a 51% stake to indigenous people. They were given 45 days to submit proposals on how this would be done.

An "indigenous Zimbabwean" had been defined as "any person who before the 18 April 1980" - the official founding date of Zimbabwe - "was disadvantaged by unfair discrimination on the grounds of his or her race".

The law was seen as an extension of the government's policy of seizing white-owned farms and giving them to locals, which started more than 10 years ago.

That programme is considered by many to have failed, as many seized farms have remained dormant.

As a result, Zimbabwe - once known as the bread basket of Africa - has become a net importer of food.



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