Zimbabwe abolishes controversial equity law

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Finance Minister of Zimbabwe Mthuli Ncube, gestures during an interview with AFP at the World Economic Forum  annual meeting, on January 22, 2019, in Davos, eastern Switzerland. (FABRICE COFFRINI/AFP/Getty Images)
Finance Minister of Zimbabwe Mthuli Ncube, gestures during an interview with AFP at the World Economic Forum annual meeting, on January 22, 2019, in Davos, eastern Switzerland. (FABRICE COFFRINI/AFP/Getty Images)

Zimbabwe's Finance Minister Mthuli  Ncube said Thursday that an equity law blamed for scaring off foreign investors would be abolished as the country seeks to woo fresh capital to shore up its moribund economy.

Presenting the mid-term 2019 budget to parliament, Ncube said the so-called Indigenisation Act -- which requires foreign companies to give shareholdings of up to 51% in joint ventures to local partners -- would be repealed.

When the law was originally passed in 2008, the government argued it would empower the majority black population who had been disadvantaged by colonial rule.

But critics say it merely benefitted allies of the then President Robert Mugabe and has scared away foreign investment.

President Emmerson Mnangagwa, who took over from Mugabe, has promised to revive the economy and declared Zimbabwe "open for business".

He had also pledged to end the country's international isolation, woo back investors and generate economic growth to fund the country's shattered public services.

Nevertheless, the economy has declined even further, with shop prices rocketing and annual inflation peaking to 176 percent in June.

The US dollar has been the national currency since 2009 when the country trashed its own currency following hyperinflation of as much as 500 billion percent.

But in June, Zimbabwe ended the use of US dollars and other foreign currencies and replaced them by two local parallel currencies -- "bond notes" and electronic RTGS dollars, which would combine to become the new "Zimbabwe dollar".

The new "Zimbabwe dollar" does not yet exist in paper form.

The mid-term budget also included proposals to raise electricity tariffs by between 200 and 400 percent in order to ease power shortages that have led to power cuts lasting up to 18 hours across the country.

The finance minister also said the government was feeding hundreds of thousands of people affected by drought both in rural and urban areas, providing grain to 757 000 households since January.

A government document early this year said that around 7.5 million people -- around half of the population -- in both rural and urban areas would require food aid between February 2019 and March next year. (edited)

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