UPDATE 2-Zimbabwe says not all foreign firms to sell stakes

(Adds more quotes, mining industry official comment)

By Nelson Banya

HARARE, March 11 (Reuters) - Zimbabwe will not force black partners on foreign companies and not all these firms would be compelled to sell majority shares to locals under a new nationalisation law, a government minister said on Tuesday.

President Robert Mugabe, who faces a tough re-election later this month, has signed a bill giving locals the right to take majority control of foreign companies.

The move has rattled foreign investors and analysts say it could deepen the economic crisis ravaging the southern African country.

"It's not every business which will have to have 51 percent indigenous ownership. The minister will prescribe on the basis of capital (investment) and employment levels," Paul Mangwana, minister for indigenisation and empowerment, told journalists.

Analysts said Mangwana's comments might be an attempt by the government to calm industry fears but a senior mining industry official said the move was unlikely to settle investor nerves. The law remained on the books.

"A different explanation, outside the law, cannot allay fears. The most important thing is the form and content of the Act. A separate explanation by word of mouth cannot bring any comfort," Jack Murehwa, head of Zimbabwe's mining chamber, said.

Mangwana said the government would not force black partners on foreign companies. The government would draw up a timeframe for the process it calls indigenisation.

"We will not force partners on companies. Only when an investor fails to identify a suitable partner will government step in because we will have a databank of potential investors."

Zimbabwe is already suffering from foreign investor flight, the world's highest inflation rate of over 100,000 percent and severe food, fuel and foreign currency shortages.

But Mugabe is digging in for March 29 elections, facing one of the biggest political challenges in nearly three decades of rule after former finance minister Simba Makoni broke ranks with him and announced he would run as an independent.

Makoni's chances of defeating Mugabe were boosted when Dumiso Dabengwa, a senior member of Mugabe's ruling ZANU-PF, endorsed him.

Mugabe also faces long-time rival Morgan Tsvangirai, leader of the biggest faction of the opposition Movement for Democratic Change (MDC), in the polls.

Analysts say Mugabe may be offering shares in foreign-held companies to those who may seek to back his opponents.

Mangwana said firms, especially in the mining industry, would have empowerment credits calculated on the basis of their social investment, which Murehwa said should now also be legislated.

Foreign companies active in Zimbabwe include platinum miners Impala Platinum (IMPJ.J), Anglo American Platinum (AMSJ.J), Aquarius Platinum (AQPJ.J)(AQP.AX) and banking groups like Britain's Barclays Plc (BARC.L) and Standard Chartered (STAN.L). (For full Reuters Africa coverage and to have your say on the top issues, visit: africa.reuters.com/ ) (Editing by Ralph Boulton)