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Opinion: Zimbabwe law squeezes foreign-owned firms

Mugabe's new indigenization law will enrich his followers at the expense of Zimbabwe's people.

Zimbabwe President Robert Mugabe smiles after meeting a business delegation from South Africa in Harare, April 6, 2009. South African business leaders on Monday called for guarantees to protect new investment in Zimbabwe, after noting efforts by Harare's new unity government to attract business to help its battered economy. (Philimon Bulawayo/Reuters)

BOSTON — 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 indigenization 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.