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Mugabe indigenisation plan could deliver killer punch to economy
Edith Kaseke, ZimOnline
May 29, 2007

http://www.zimonline.co.za/Article.aspx?ArticleId=1448

HARARE - President Robert Mugabe's government will shortly gazette a law allowing locals to own majority stakes in all businesses, as part of Harare's controversial indigenisation drive, but analysts warned that such plans will further worsen an already hemorrhaging economy.

Zimbabwe is facing its most severe economic crisis since independence in 1980, which economic analysts say has been accelerated by Mugabe's seizure of white-owned farms for blacks and in the process stoked widespread food shortages.

But the veteran leader, who has pursued controversial economic policies since 2000, has indicated the government wants all the country's resources in the hands of majority blacks.

The Indigenisation and Empowerment Bill is expected to be tabled in parliament next month and will among other things compel businesses to sell 51 percent of their holding to locals.

"This has serious consequences for the economy and if you look at the skills base it is shrinking, so you ask who will be able to manage these businesses," John Robertson, a Harare-based consultant economist said.

"But nothing makes sense anymore and what I can only think is that this is part of the government's patronage system to reward supporters. It started with the farms and now because there are no more farms to give they have to look for other opportunities," said Robertson.

The southern African nation's economic crisis has seen inflation accelerating into hyperinflation territory and last month rose by 100 percent on a monthly basis, pushing the annual figure past 3 700 percent while unemployment has surged above 80 percent.

The economy has shrunk by 35 percent in real terms since 1999 and is seen contracting further without tight monetary and fiscal policies.

The crisis has heightened political tensions and led to clashes between opposition supporters and law enforcement agents, while government workers have previously downed tools to press for better wages and working conditions.

There are still dozens of British and South African-owned companies operating in Zimbabwe and Mugabe has on numerous occasions said it was out of the benevolence of his government that British firms had not been seized.

But he has threatened to seize the businesses for what he calls London's continued interference in the country's domestic affairs.

Some of the top British companies include London-listed resource groups Rio Tinto and Anglo American and financial institutions Standard Chartered and Barclays Bank.

British American Tobacco, which once ranked Zimbabwe among its lead growers has dramatically scaled down operations in the country while Rio Tinto sold its gold and nickel mining operations to local subsidiary RioZim in 2003.

On Sunday, Barclays issued a statement saying: "We are assessing the potential impact of the proposed legislation on our business in Zimbabwe. It is early days and the proposed Bill may not become law."

Political analysts said the latest move could further compound the country's pariah status.

"These are the signs of a desperate regime, it is becoming more and more ridiculous and Zimbabwe is confirming its pariah status," John Makumbe, a political science lecturer at the University of Zimbabwe said.

"But we are not surprised that the government will resort to such tactics to buy the loyalty of a few individuals. Certainly this will not benefit the majority and once again the economy will take a big knock," he added.

The government is expected to table the long-awaited Mines and Minerals Amendment Bill in August, which will require foreign miners to cede majority stakes to locals. This has sent shivers in the sector and most of the miners have stopped all expansion projects.

Mugabe has sharply criticised the business sector for rampant profiteering and accused them of increasing prices on a daily basis to foment anger among consumers so they can turn against his government.

Analysts said the legislation would sail through both Houses of Parliament, which are dominated by the ruling ZANU PF party.

The veteran Zimbabwean leader, now 83 and seeking another term in 2008, has defended his policies, which have put him at odds with the West and says instead sanctions and sabotage by his enemies has bled the once breadbasket of southern Africa. - ZimOnline

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