Thursday, February 11, 2010

Another Disastrous Government Policy in Zimbabwe

New regulations pushed through by President Robert Mugabe are threatening to destroy Zimbabwe’s unity government and plunge the country into another economic crisis. Under the new law, all foreign and locally owned companies must turn over 51% of their ownership over to black Zimbabweans. This law is eerily similar to the “land reforms” that Mugabe’s government passed a decade ago that seized white-owned farms across the country.

At the heart of the laws is a legitimate concern – thanks to its past as a British colony, Zimbabwe’s white minority owned many of the country’s farms and businesses, so it makes sense that after independence the government would want to increase the percentage owned by Zimbabwe’s black majority. But in practice, the land reforms didn’t compensate white farmers for their losses; in many cases armed gangs just threw the white farmers off their land. And to make matters worse, rather than turning the land over to black farmers, Mugabe parceled them out as graft to his political cronies – few of these men bothered to work the land, Zimbabwe went from being the “breadbasket of southern Africa” to a nation plagued by chronic food shortages.

Now there are worries that the same thing will happen to the country’s business sector. One of Zimbabwe’s top economists Daniel Ndlela said in the UK’s Telegraph newspaper: “there will be no foreign investment into Zimbabwe. Why would anyone come into Zimbabwe with $100 and be left with $49?” Zimbabwe had been hoping that the unity government would bring much-needed foreign investment into the country whose economy has been in shambles thanks in large part to the land reforms. But the unity government itself looks like it might be a casualty of the new economic regulations. Prime Minister Morgan Tsvangirai said he was never consulted on the ownership law and is furious over its passage. Meanwhile, some of the few foreign firms currently operating in Zimbabwe are now considering withdrawing their operations. The law is scheduled to be phased in over the next five years.
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