Zimbabwe's unity government has suspended rules that require foreign-owned companies in the country to sell a majority stake to local citizens.

A spokesman for Morgan Tsvangirai, the prime minister, said on Tuesday that government officials will review the rules, which were introduced on March 1, before deciding anything further.

"The cabinet has today declared those regulations null and void, and they are being suspended to allow for broad-based consultations on the best way to proceed," spokesman James Maridadi told the Reuters news agency.

"Nothing is going to happen until the regulations have been reviewed to get a consensus on the way forward."

Controversial law

The regulations applied to firms worth more than half a million dollars, in particular, mining companies and banks.

Under the rules, all foreign companies were required to submit proposalson how they would sell 51 per cent of shares in local subsidiaries to Zimbabweans within five years.

The largest targets of the law included local subsidiaries of British banks Barclays and Standard Chartered, as well as mining companies such as Impala Platinum, AngloPlatinum and Rio Tinto. 

The administration of Robert Mugabe, Zimbabwe's president, passed the law to localise control of foreign firms in 2007.

But the controversial law split Zimbabwe's unity government,established after the law was passed.

Supporters of the law have denied comparisons to the takeover of white-owned farms, instigated in 2000, saying that shares in companies would have to be bought.

But others have warned that the law will damage Zimbabwe's already ailing economy and jeopardise foreign investment.