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Zimbabwe law restricting foreign ownership of companies takes effect

By Bernard Hibbitts (editor) and University of Pittsburgh School of Law students.

[JURIST] A Zimbabwean law requiring all foreign-owned companies operating in the country to transfer a majority share to local owners went into effect Monday. The Indigenization and Economic Empowerment Act requires all companies worth more than USD $500,000 to submit information on the racial makeup of their shareholders and a plan for the transfer of a 51 percent ownership to native black Zimbabweans within 45 days. These plans must be enacted within five years, with noncompliance resulting in five years imprisonment. The law was passed by the Parliament of Zimbabwe in 2007 when it was still dominated by the Zanu-PF party of President Robert Mugabe, but was published only last month. The reform scheme has faced criticism for its timing in the wake of a major economic crisis in which the country faced hyperinflation and food shortages. Mugabe, at celebrations marking his eighty-sixth birthday Saturday, defended the law, comparing it with the controversial land reform program that was initiated in 2000, and saying that a country's resources should benefit its indigenous population. Prime Minister Morgan Tsvangirai, in a unity government with Mugabe after the contentious 2008 presidential election, opposed the enforcement of the law, claiming that it was void because it was not debated by the unity cabinet. In January, the Zimbabwe High Court ruled that it is not bound by a decision of the Southern Africa Development Community Tribunal that ordered the state to halt the land reform program for its discriminatory nature. Mugabe faced harsh criticism for the program, which, since 2000, has sought to redistribute white-owned land among the nation's indigenous farmers. In February 2006, the Zimbabwean land minister said that there are no white farmers operating legally in Zimbabwe. The government has appropriated some 4,000 farms through the program, and has traditionally argued that any compensation owed white farmers should be paid by the British government, Zimbabwe's former colonizer. Many observers attributed Zimbabwe's disastrous economic circumstances, including an inflation rate exceeding 231,000,000 percent, to the policy, as previously productive farms become barren under new inexperienced owners.

Full post as published by JURIST - The Paper Chase on March 01, 2010 (boomark / email).