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Zimbabwe law hits foreign groups
Alec Russell, Financial Times (UK)
September 26, 2007

Zimbabwe’s parliament passed a law on Wednesday giving the state controlling stakes in foreign-owned businesses, including banks and mines. It happened in the face of warnings from the opposition and businesses that the law would have catastrophic consequences for Zimbabwe’s already crumbling economy. While the official rate of inflation is 6,500 per cent, the real figure is widely believed to be far higher. The business community has been clinging to the hope that the law would, if passed, never be implemented. But as they battle to stay in power, allies of Robert Mugabe, the president, have insisted it will be enforced and justified it as an attempt to lift up the masses. "We cannot continue to have a skewed economic environment where our people are not able to fully participate," Paul Mangwana, the indigenisation and economic empowerment minister, told parliament. The government would work with business sectors to establish deadlines for the transfer of shares to local groups and individuals, he said. MPs from the opposition Movement for Democratic Change walked out of parliament in protest as Mr Mugabe’s ruling Zanu PF party pushed the bill through. They argued that the bill is aimed at enriching a few leading figures in Zanu PF and winning votes in the parliamentary and presidential elections scheduled for next March.

Two of the largest foreign-owned banks in Zimbabwe, Standard Chartered and Stanbic, launched a last-ditch bid to stop the legislation when they warned they might have to withdraw from Zimbabwe if they lost 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. Stanbic, the name under which South Africa’s Standard Bank trades in the rest of Africa, said it would not allow the use of its corporate identity by businesses in which it did not have a majority stake. Among the multinational mining companies that might be affected are Anglo Zimbabwe, the Bindura Nickel Corporation and Rio Zim. Business leaders warned in the countdown to the vote that the Indigenisation and Empowerment Bill would precipitate a 30 per cent drop in foreign investment. "I want to urge the minister to reconsider because our economy needs foreign direct investment," Innocent Gonese, an MDC MP said. The bill is the latest in a series of draconian moves under Mr Mugabe whose rule has in the past decade led to the implosion of what was once one of Africa’s more vibrant economies.

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