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New
threat to Zim economy
Ignatius Banda, Mail & Guardian (SA)
September 24, 2007
http://www.mg.co.za/articlePage.aspx?articleid=320162&area=/insight/insight__africa/
Zimbabwean businesses
have warned Robert Mugabe's government that legislation
allowing for the seizure of foreign-owned companies will have
dire consequences on an economy that already is ravaged by crisis.
Anxiety is rising after
the government moved closer to passing the law with a second reading
of the Bill in Parliament this week. Business leaders, desperate
to stop the Bill, have warned government to concentrate on economic
recovery, instead of pressing for expropriation of foreign assets.
Foreign investment
in Zimbabwe would plunge by up to 30% upon enactment of the Bill,
while the economy -- which has shrunk 50% since 2000 -- will face
further ruin, they said.
Two of the largest foreign-owned
banks, Standard Chartered and Stanbic, have warned that they could
be forced to withdraw from the country if they lose their majority
stakes.
"Removal of the
possibility to hold a controlling interest might make it difficult
for existing companies or potential new investors being able to
justify their continued interest in the country," Standard
Chartered said in a report prepared for three parliamentary committees
examining the legislation.
Standard Bank, which
has announced a plan to sell up to 30% of its business in Zimbabwe
to black staff members, said foreign banks would not allow the use
of their corporate identities by businesses in which they no longer
held majority control.
"International banks
who see their shareholding cut to 49% would refuse to allow the
new entity to use their brand name and other intellectual property
belonging to the international group, requiring that the new bank
develops its own brand identity, which would not be immediately
recognisable to the outside world," Stanbic warned in its own
submission.
"Acquisition of
equity in foreign-owned entities, without sufficient funding, has
the danger of being seen negatively as expropriation."
Seizing 51% of foreign
assets in Zimbabwe "would make our country relatively less
attractive to foreign investors when compared with countries with
significantly lower thresholds", Standard Bank said.
Foreign banks have provided
much of the support for agriculture and their withdrawal would further
weaken what was once the mainstay of Zimbabwe's economy. Barclays
and MBCA, which is owned by Nedbank, are the two other major -foreign-owned
banks in Zimbabwe.
Jack Murehwa, president
of the Chamber of Mines, said the proposed legislation was vague
on how government intended to treat existing agreements and would
further weaken Zimbabwe's international standing.
"Zimbabwe is now
seen as a high-risk destination because of uncertainty over security
of tenure and lack of confidence in the rule of law," he said.
Mugabe has been increasing
his control of the economy in recent months, ordering price cuts
and threatening the takeover of private businesses, which he accuses
of undermining his rule. His policies have worsened the crisis and
raised tension.
This week government
cheered official data showing that inflation had dropped to 6 592%
from 7 600% in July. But the figure is still the highest in the
world and critics point out that real inflation is probably much
higher.
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