President Robert Mugabe’s signature of a law claiming a 51% stake for the state in all foreign and white-owned businesses has sent shock waves through the industrial and financial sectors, as mines and banks are among the prime targets.

Political analysts said Mr. Mugabe’s signature of the controversial legislation just weeks before presidential and general elections was intended to shore up support for his administration in the midst of a full-fledged economic collapse. Mr. Mugabe has promised to give black Zimbabweans their own stake in the economy.

Parliament passed the Indigenization and Economic Empowerment Bill last September, but the bill dropped out of sight until last month when President Mugabe, gearing up for a re-election bid, made it a centerpiece of his campaign. His signature of the legislation was announced in a state Gazette published on the weekend.

Business sources said that most companies in the banking and mining sectors have decided not to sink further capital into Zimbabwe for fear of losing it. 

The pullback is said to jeopardize a proposed US$270 million expansion of Rio Tinto’s Murowa diamond mine amid speculation the Anglo-Australian firm might exit entirely.

Foreign Ministry sources said diplomats from Australia, Britain and South Africa have been frantically seeking clarification of the government's intentions.

Meanwhile, banking and mining executives declined to comment. Bankers Association of Zimbabwe President John Mangudzya said he would only be able to comment on Wednesday after meeting with his institution's stakeholders. Acting Chief Executive Douglas Verden of the Chamber of Mines also declined to comment.

Despite the furor, Indigenization Minister Paul Mangwana told reporter Blessing Zulu of VOA's Studio 7 for Zimbabwe that there is no turning back on what amounts to the nationalization of key sectors. President Callisto Jokonya of the Confederation of Zimbabwe Industries said the government must move cautiously given the risks.

More reports from VOA's Studio 7 for Zimbabwe...