President Robert Mugabe has signed a law requiring all foreign companies operating in Zimbabwe to give majority equity to black Zimbabweans, a move analysts see as the final nail in the coffin of the country's economy.

More than 200 British and South African firms that have invested heavily in Zimbabwe will be affected, including Lever Brothers, Barclays Bank, Standard Chartered Bank, Standard Bank, Stanbic Bank, Impala Platinum, Angloplat, Mettalon Gold, Rio Tinto, Edcon, Merchant Bank of Central Africa and several enterprises owned by Anglo American.

With Mugabe facing a crunch election on 29 March and eager to appease and maintain the support of his cronies, any delays in implementing the law are unlikely.

"It's a catastrophe," said economist Eddie Cross, a former leader of the Confederation of Zimbabwe Industries, now an opposition party economist.

"This is unacceptable and many big foreign firms badly needed for economic revival in this country are going to abandon their businesses."

Zimbabwean government sources said Mugabe rushed to sign the new law at the weekend because he was fearful he could lose support to former finance minister Simba Makoni, who is challenging him in the presidential elections.

Makoni, whose activities have been ignored by state media since he announced his defection, is believed to enjoy enormous support from within the ruling Zanu-PF and the military. But few have come out to publicly declare their support, fearing reprisals.

"Since there are no farms left to seize for redistribution, the foreign firms offered him (Mugabe) the best prospects for patronage," said a senior Zanu-PF official, who remains in the ruling party but is secretly supporting Makoni.

In 2000 and sensing defeat in parliamentary elections that year, Mugabe unleashed his militant war veteran supporters on a campaign of occupying and seizing white-owned farms. Fifteen farmers and thousands of black farmworkers were killed or injured in the process.

The campaign has destroyed commercial agriculture, once the economic mainstay, and pushed inflation to more than 100 000 percent and unemployment to 85 percent. More than 3-million Zimbabweans have fled the country to foreign lands.

The Zimbabwean dollar, which was stronger than the US dollar and equal in value to the British pound when Ian Smith handed over the country to Mugabe in 1980 is now worthless. About Z$55-million will now buy a pound (about R16).

Analysts are unanimous that the new Indigenisation and Economic Empowerment Bill has destroyed any prospects of economic recovery in Zimbabwe.

"The only way out for Zimbabwe is the removal of Mugabe's regime on March 29 and to replace it with a government that will introduce new sensible business arrangements," said a bank economist, who preferred anonymity.

According to the new act, indigenous black Zimbabweans will own at least 51 percent of the shares of every public company and other businesses. No restructuring, merger or de-merger will be approved unless indigenous Zimbabweans hold 51 percent shares in the resultant business.

No projected or proposed investment in a prescribed sector of the economy will be approved unless a controlling interest in the investment is reserved for Zimbabweans.