Daily Telegraph: Robert Mugabe to seize control of companies

EXTRACT: Several major British firms and FTSE100 companies in the banking, petroleum and mining sectors have operations in Zimbabwe, including Barclays, Standard Chartered, BAT, Rio Tinto, Anglo American, BP and Shell. But with their interests under threat, few would be drawn on the potential consequences of the law yesterday.

By Byron Dziva in Harare and Tom Stevenson
Last Updated: 3:14am BST 24/08/2007

President Robert Mugabe has paved the way to effectively seize control of foreign-owned companies, many of them British, dealing another blow to Zimbabwe’s tottering economy.
 
Under a bill laid before Zimbabwe’s parliament, all firms undergoing structural changes, and any new investments in the country, must be 51 per cent controlled by “indigenous Zimbabweans”.

Paul Mangwana, the minister responsible for the programme, said the bill was intended to “create an enabling environment that will result in increased participation of indigenous people in the economic activities of the country”.

The legislation makes clear, however, that white Zimbabwean shareholders do not count. It defines an “indigenous Zimbabwean” as “any person who was disadvantaged by unfair discrimination on the grounds of race before independence in 1980”.

Given the precedent of the country’s commercial farms, the measure is likely to lead to majority stakes in companies being handed over to Zanu-PF officials and their cronies, who will asset-strip them and run them into bankruptcy.

From 2000, white-owned farms were seized supposedly to ensure landless blacks received property, but instead prime country houses – sometimes more than one – went to those with government connections.

Agriculture has since collapsed and, according to the World Food Programme, more than four million people will need food aid by the end of this year, in a country that was once a regional breadbasket.

A repetition of such benefits, this time from the corporate sector, will enable Mr Mugabe to shore up his support in the divided ruling party and act as a temptation to voters in elections due next March.

“There was no doubt they would push it through before the elections because it’s designed to garner votes,” said Eric Bloch, an economic commentator. “What remains to be seen is how vigorously they are going to implement it, but it’s certainly going to discourage investors.”

The language of the bill appears to make white-owned Zimbabwean companies equally liable to its provisions, although officials said foreign firms would be the first objects of its implementation, which may prove to be a hollow promise. Zimbabwe already has the highest inflation in the world, at 7,634.8 per cent, and four fifths of the population are unemployed.

“It will make things worse,” said John Robertson, an independent economist, who added that the government “will have to kiss goodbye to foreign direct investment”.

Business assets, he pointed out, were “pretty valueless in the hands of people who don’t know how to make it work.

“Every potential investor will choose another country to invest in and Zimbabwe will be virtually abandoned.”

The only possible exception, he said, would be platinum miners, as Zimbabwe has large untapped reserves.

Zanu-PF has a large majority in parliament and the bill, which was transferred to a committee for detailed consideration, is virtually certain to pass later this year.

Several major British firms and FTSE100 companies in the banking, petroleum and mining sectors have operations in Zimbabwe, including Barclays, Standard Chartered, BAT, Rio Tinto, Anglo American, BP and Shell. But with their interests under threat, few would be drawn on the potential consequences of the law yesterday.

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/08/24/wmugabe124.xml

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