Mugabe eyes shares in all foreign-owned firms

Andrew Meldrum

Just in case you were thinking that Zimbabwe's power-sharing government is successfully returning the country to stability and normality, think again.

A new law came into effect on Monday that requires all foreign-owned businesses to sell 51 percent of their shares to black Zimbabweans. The controversial law is a pet project of President Robert Mugabe's and it shows that the 86-year-old leader remains very much in charge and determined to pursue policies that will do further damage to Zimbabwe's already hammered economy.

The new indigenisation law is widely viewed in Harare as similar to Mugabe's chaotic and violent seizures of white-owned farms, which dismantled the country's large-scale farming sector. The farms are now in black hands, including his wife, generals, cabinet ministers and cronies. The vast majority of the farms are no longer growing crops, contributing to Zimbabwe's chronic food shortages.

Mugabe claimed to be grabbing the farms for the benefit of Zimbabwe's poor black subsistence farmers. But these are the very people who are hungry and worse off than before the seizures of white-owned farms. Mugabe's populist rhetoric rings hollow with them.

Now, in search of a new source of wealth to fund the patronage system through which he retains power, Mugabe has turned to all foreign-owned businesses.

The law means that all foreign-owned firms operating in Zimbabwe must sell 51 percent of their shares to black Zimbabweans within five years. Zimbabwe has many foreign-owned firms including major platinum, gold and chrome mines. Major South African and Australian mining firms will be affected.

Zimbabwe's platinum resources are particularly valuable as the country is estimated to have the world's second largest deposits of the increasingly strategic mineral.

Not only will firms be forced to find black majority shareholders but they will have to be approved by Mugabe's Zanu-PF party, a notoriously greedy bunch. This means companies will be majority-owned by people friendly to Zanu-PF. The shares will have to be sold at discounts so steep that Harare economists call it a giveaway.

Long after Mugabe and Zanu-PF lose political power, this law will ensure that Zimbabwe's most valuable assets remain in their hands.

Major South African investors have already stated they will freeze any further inflows of capital to Zimbabwe as a result of the new law. Existing mines are talking about freezing their operations.

Harare economists say the new law will virtually stop any new foreign investment in the Zimbabwe. This is bad news for Zimbabwe's economy which is struggling to get back on its feet after 10 years of decline. Zimbabwe's economic decline is the largest ever recorded by a country not at war, according to the World Bank.

This destructive new law should be a wake-up call to South African President Jacob Zuma if he still thinks that he, or anyone else, can do business with Robert Mugabe.

Prime Minister Morgan Tsvangirai opposed the new law and attempted last week to stop it, saying that it was enacted without due process, but Mugabe and his Zanu-PF party rejected the objections of Tsvangirai and his Movement for Democratic Change.

In office for one year, Zimbabwe's power-sharing government has succeeded in improving a few things. The unwieldy coalition has managed to tame the country's hyper-inflation, although it was at the expense of the Zimbabwe's currency. The new government has also brought a measure of stability to the country.

However, this new indigenisation law, taken with the failure to liberalise the press and the refusal to fully respect the rule of law, shows that Mugabe still calls the shots and that he intends to wring every last drop of wealth from the country at the expense of the very people who he claims to champion.