Zimbabwe’s prime minister rejects new ownership laws

Finance

Zimbabwe’s Prime Minister Morgan Tsvangirai rejected legislation signed into law by President Robert Mugabe that forces companies to sell more than half of their shares to black investors because it would “scare off” foreigners.

“The regulations would have scared off foreign investors, already jittery about Zimbabwe as an investment destination,” Tsvangirai said in a statement posted on his own Web site yesterday. “Without foreign direct investment in Zimbabwe, it will be difficult to kick-start the national economy.”

Zimbabwe is attempting to grow its economy after a decade of political turmoil and recession under the leadership of Mugabe, whose Zimbabwe African National Union-Patriotic Front party controlled parliament from independence in 1980 until March 2009, when it lost elections to the Movement for Democratic Change.

Under the law, companies operating in the country with assets worth more than US$500,000, including Anglo American plc and Old Mutual plc, must sell 51% of their local units to black investors within five years, according to a copy of the law distributed by Harare-based Veritas Trust yesterday.

The rules, due to take effect from March 1, are “of no force as they were gazetted without consultation within government,” Tsvangirai said in the statement. In Zimbabwe, laws only come into effect once they have been published in the Government Gazette, a public document.

The so-called Indigenisation and Empowerment Act was passed by parliament in 2008 without being signed into law by Mugabe. The act stipulates prison sentences of as many as five years for non-compliance.

Should the law be enforced, it would be a “significant obstacle” to the attempts of ArcelorMittal  to buy a state-owned steelmaker known as Ziscosteel, Chief Executive Officer Nonkululeko Nyembezi-Heita said by phone from Johannesburg today. Zisco’s mill, in Zimbabwe’s Midlands province, is largely inoperable because of ageing machinery and cash constraints.

“The legislation has a provision that gives the mining minister the right to waiver the ownership requirement,” she said. “The conditions of that aren’t prescriptive.”

Zimbabwe has the world’s second-largest reserves of platinum and chrome, after South Africa, and also has deposits of gold, coal, diamonds and nickel.

Impala Platinum Holdings Ltd reached an agreement “about two years ago” to build infrastructure in Zimbabwe in lieu of selling 51% of its operations there, spokesman Bob Gilmour said by mobile phone today.

Old Mutual said its team there is “busy reviewing the regulations,” London-based spokesman Matthew Gregorowski said in an e-mailed statement. Calls to the insurer’s headquarters in Harare weren’t immediately answered.

Anglo American plc referred queries to Anglo Platinum Ltd, whose spokeswoman Mary-Jane Morifi said by mobile phone that the miner may issue a statement later.

Feb 10 (Bloomberg)