Harare - Zimbabwe is planning to tone down a controversial equity law which forces foreign companies to cede a majority shareholding to local investors, a cabinet minister said Sunday.

Zimbabwe's controversial 2007 indigenisation law states that foreign firms must hand a 51 percent shareholding to local partners.

The law spooked investors and was a source of conflict between President Robert Mugabe's allies, with some maintaining a hardline stance while others opposed the measures.

Information Minister Jonathan Moyo said it would be adapted for different sectors.

“We are reviewing and tightening the indigenisation and empowerment policy by being pragmatic without being dogmatic about it,” he told the state-owned Sunday Mail.

“(Foreign) investors will be allowed to recover their initial capital investment, an appropriate return on investment and operational costs before the sharing of production outputs or profits,” Moyo said.

Under the law, foreign owners of Zimbabwean mines were given an ultimatum to surrender more than 50 percent of their shares and find local partners or risk nationalisation.

Mugabe said the law, which followed controversial land reforms, was meant to reverse imbalances which resulted from colonialism.

But critics including opposition leader Morgan Tsvangirai said it would enrich Mugabe's allies and scare away foreign investors.

Sapa-AFP