HARARE - Zimbabwe's government has proposed that indigenous Zimbabweans take 51 percent ownership of all foreign companies, including mines and banks, according to a draft law seen by Reuters Friday.

An official at the Chamber of Mines expressed surprise and concern at the proposed legislation, prepared by the Ministry of Youth Development, Indigenisation and Empowerment.

We haven't seen the regulations but if what we've heard is true, then that's a step back. It goes against what we've been discussing with the Ministry of Mines and other ministries, the official, who declined to be named, said.

The draft regulations said indigenous Zimbabweans should hold a controlling interest in each foreign-owned business with an asset value above $500,000.

Zimbabwe passed an Indigenisation and Economic Empowerment law in 2007, which seeks to transfer control of all firms -- including mines and banks -- to black Zimbabweans.

Analysts believe that this would unsettle investors and could further damage an economy already ravaged by the collapse of commercial agriculture following President Robert Mugabe's seizure of white-owned farms since 2000.

A unity government formed by Mugabe and his rival, Prime Minister Morgan Tsvangirai, promised in February to be flexible in applying the empowerment law, but the proposed regulations suggest no change of tack.

The latest move also casts doubt on consultations between the government and the foreign-dominated mining industry over proposed changes to the mining law.

Mugabe has said amendments to the mining legislation, to be pushed through parliament soon, will seek to improve ties with the industry.

South Africa's Impala Platinum Holdings Ltd (Implats), the world's second largest platinum producer and the largest foreign mining investor in Zimbabwe, said it too had not seen the law.

We haven't had sight of this legislation at all, and so we are not in a position to comment, spokeswoman Alice Lourens said.

The unity government has been torn by disagreements between Mugabe and Tsvangirai, who agreed Thursday to end a boycott of the coalition. He gave Mugabe a month to implement their power-sharing agreement fully.

Zimbabwe