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HARARE, Zimbabwe (Reuters) -- Zimbabwe's government introduced a bill Thursday to give Zimbabweans majority ownership of foreign companies, a move critics say will deepen the economic crisis.

Critics of the Zimbabwe government fear a bill against foreign companies will worsen the economic crisis.

If passed it would give the government sweeping powers over how foreign companies, including mines, operate in Zimbabwe.

Critics accuse veteran leader President Robert Mugabe of trying to push through the empowerment bill to extend his patronage and focus attention from Zimbabwe's economic turmoil. Mugabe is seeking another five-year term in presidential elections next year.

Indigenisation and Empowerment Minister Paul Mangwana told parliament the bill would create an environment that would increase the "participation of indigenous people in Zimbabwe".

The draft was passed to a parliamentary legal committee shortly after it was introduced. It is likely to pass because Mugabe's ZANU-PF party dominates parliament, analysts say.

Critics say it is reminiscent of Mugabe's controversial policy of seizing white-owned farms to give to landless blacks, which many say triggered the economic crisis.

Empowerment of Zimbabwean companies could drain what little confidence there is left in the country and step up pressure on Mugabe to show he is in control, analysts say.

"There was no doubt they would push it through before the elections because it's designed to garner votes," said economic commentator Eric Bloch.

"What remains to be seen is how vigorously they are going to implement it, but it's certainly going to discourage investors."

Analysts say Zimbabwe's main opposition Movement for Democratic Change (MDC) is too weak and divided to pose a political challenge to Mugabe, who has been in power for 27 years.

But critics hope sanctions imposed by Western powers, along with economic turmoil, will eventually bring down Mugabe's government.

"The timing is terrible because the image out there is already one of mistrust, and after the way the government handled the land issue, this bill raises that question again about the security of investment and respect for property rights," said John Robertson, a private economic consultant.

Zimbabwe's inflation rate, already the highest in the world, jumped to a new record high of 7,634.8 percent in July according to official data.

Economists said the figure underestimated inflation due to price controls imposed at the end of June which sparked frenzied buying and emptied shop shelves.

The International Monetary Fund said last month inflation may reach 100,000 percent by year-end.

In recent years Zimbabwe has suffered from shortages of fuel, food and foreign currency as well as security crackdowns, forcing many to flee the country to neighboring states.

Mugabe, in power since Zimbabwe gained independence from Britain in 1980, accuses Western powers of sabotaging the economy in retaliation for the land seizures. He denies widespread accusations of human rights abuses, including torture.

An MDC official Wednesday accused the government of taking measures to prevent its supporters from registering to vote in next year's election.

But South Africa, which is mediating between the two parties, said Thursday it was confident that talks will "lay the foundation for free and fair elections", although Western diplomats doubt that the negotiations will succeed.

Mugabe, a former liberation hero, is also pushing for a bill that will give him room to choose a successor if he were to retire.


Indigenisation and Empowerment Minister Paul Mangwana told parliament the bill would create an environment that would increase the "participation of indigenous people in Zimbabwe".