Harare - Zimbabwe and South Africa signed a bilateral investment agreement on Friday which would protect investments made by nationals of both countries in each other's territory.

The Bilateral Investment Promotion and Protection Agreement (BIPPA), was signed in the capital by trade ministers from both countries.

"We want this BIPPA between our two countries to work. BIPPA is a document signalling to the world that Zimbabwe is ready for investments," Elton Mangoma, Zimbabwe's trade minister, said after the signing ceremony.

In 2000, at the height of the controversial land reform programmme in Zimbabwe, most South African businesses were affected and lost their investments.

The agreement means that South African-owned businesses will be protected with effect from September last year when the Global Political Agreement was signed.

Under that deal brokered by former South African president Thabo Mbeki, long time rivals President Robert Mugabe and opposition leader Morgan Tsvangirai agreed to share power in Zimbabwe.

Tsvangirai became prime minister.

Mangoma said Zimbabwe was working hard to improve its investment climate and assured South Africans and other countries that their businesses will not be affected by the state's controversial empowerment law, which requires that locals own a 51 percent stake in all foreign firms.

"When we look at our empowerment law, we are not looking at charity cases, not looking at corruption cases," the minister said.

Since independence in 1980, Zimbabwe had been the strongest economy in the region over the years, but over the past decade its economy has shrunk as a result of political and economic uncertainty.

In 2008, Zimbabwe was South Africa's second biggest trading partner in the region after Zambia, with investments ranging from banking, retail and mining to farming and transport.

Rob Davies, South Africa's trade minister said Pretoria was ready to support Zimbabwe, but warned that there was a need to address the issues related to the GPA.

"Our position is informed to a very great extent, by our conviction that the Global Political Agreement process is the best and it is the only option for Zimbabweans to come together for recovery in this country," he said.

"Our support for the implementation of the GPA process is also based on the strong sense that is also critical to our own interest as South Africa."

Businesses boycott agreement

However, Business Unity South Africa has refused to take part in the signing ceremony.

The reason, the organisation says, is that it has not been consulted about its contents, and the reported content of the agreement has rung alarm bells for some members.

"For such a treaty to act as a catalyst for increased levels of investment, the private sector needs to be comfortable with all aspects of the text," Busa said in a statement on Thursday. "We do not yet have full information about the scope of the agreement and it is these uncertainties that are particularly worrisome for the business community."

It added that when the text of the agreement becomes publicly available then Busa would be in a position to issue a more detailed assessment of its business implications, especially for South African investors in Zimbabwe.

Busa also hopes that there will be a transparent and robust debate around the issues as part of the Parliamentary processes before the agreement is ratified.

- Sapa-AFP