President Robert Mugabe has signed a law that could force foreign companies to hand control of their operations in Zimbabwe to local people.

The law, signed last Friday, is Mr Mugabe’s latest strategy to shift white-owned wealth into black hands. It comes three weeks before a general election that is regarded by observers as the most serious threat to the President’s 28-year rule.

Among the provisions in the law is a ban on any investment, merger or restructuring unless the majority share-holding is held by black interests. The Minister of Indigenisation must also carry out an assessment of the proportion of black people in every company in the country. This will, in effect, require at least 51 per cent of the Zimbabwean operations of companies such as Barclays, Rio Tinto and Anglo American to be owned by local people.

The law does not specify whether the owners will be recompensed, unlike the white farmers in the country who did not receive payment when their assets were taken. A company director in Zimbabwe told The Times: “I went to see my banker today and he was wringing his hands. He said it’s very serious, very bad indeed.”

Some companies affected by the new law said that they had not seen any details. Sources said that some investment was already being withheld from the country.

Rio Tinto has a gold mining subsidiary, RioZim, which is 22 per cent owned by Zimbabweans. A spokesman said that the company supported black empowerment provided it was done at the right pace. Anglo American’s AngloPlatinum subsidiary is negotiating with the Government over indigenous participation in its $400 million (£202 million) Unki mine development. British American Tobacco and Barclays own 57 per cent and 64 per cent, respectively, of their Zimbabwean subsidiaries. Both said they were considering effects of the law.

Economists fear that the Indigenisation and Empowerment Act will have the same effect on the business sector as the raid on white-owned farms. Millions of acres of farmland have reverted to natural grass during the past decade since Mr Mugabe’s eviction of white farmers.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive