Harare - Regulations published Tuesday in Zimbabwe declaring that large companies must hand blacks a 51 per cent stake within five years were summarily dismissed as "null and void" by Prime Minister Morgan Tsvangirai. The regulations, passed under two-year-old black empowerment legislation, say that by mid-April, all businesses with assets valued over 500,000 dollars will have to submit to the government a form detailing the racial composition of their current shareholding.

 

The power-sharing government, headed by President Robert Mugabe, would then decide how much of its shareholding is to be "ceded" to "indigenous" Zimbabweans.

 

"I am in charge of all policy formation in cabinet and neither myself nor the cabinet were shown these regulations before they were gazetted," former opposition leader Tsvangirai said in a statement. "They were publishedwithout due process as detailed in the constitution and are therefore null and void."

 

A maximum penalty of five years in jail faces any business that misses the deadline, according to the regulations.

 

The same penalty awaits whites who use black employees as "fronts," according to the law. The country's minister of indigenisation will keep of list of "suitable candidates", to whom shares can be ceded.

 

"We are trying to come up with policies that attract investment intothe country," said Tsvangirai's spokesman, James Maridadi. "The thrust is to portray Zimbabwe as a safe destination for investment. This is counter-productive, it is old thinking."

 

He said Tsvangirai was to meet with Mugabe over the issue. The prime minister has also summoned Empowerment Minister Saviour Kusukuwere, a Mugabe appointee, to a meeting Wednesday.

 

Political analysts say the promulgation of the law appears to be a deliberate strategy by Mugabe's Zanu-PF party to try and shore up its shrinking support among the electorate. Mugabe has long used patronage as a means to secure loyalty.

 

"It will obviously turn off investment very strongly," said economist Tony Hawkins. "It doesn't matter who they are, the Chinese, everyone. And the Chinese are the biggest investors."

 

Companies most likely to be affected were foreign-owned, he said, and investors on Zimbabwe's stock exchange.

 

Last week, Tsvangirai told big business at the World Economic Forum in Switzerland that "confidence has returned" to Zimbabwe following a decade of economic collapse. "This is the time to look at the country in a more positive light," he said.

 

Business executives expressed shock at the new laws. "First they took the farms, now they are taking businesses," said one executive.

 

The regulations take effect on March 1 and companies have 45 days inwhich to complete and submit to the government a form that gives the names, nationality and identity details of their shareholders, andwhether they are "indigenous" or "non-indigenous" Zimbabweans.

 

Zimbabwe's racial profile has fundamentally changed since independence from white minority rule nearly 30 yearsago, when the economy was heavily dominated by whites. Since then, the white population has fallen from 200,000 to around 30,000 and most major businesses are run by blacks.

 

At Davos last week, Rio Tinto diamonds and minerals chief executiveHarry Kenyon-Slaney, said "the only threat to our operations is indigenization programmes."