Lloyd Gumbo Senior Reporter
ZIMBABWE stands to benefit from China’s introduction of an International Payment System as it will cushion the country and Zimbabwean firms from the seizure of their revenue by the United States’ Office of Foreign Assets Control (Ofac). The US Treasury Department has over the years intercepted payments running into millions of dollars due to local firms as part of its illegal economic sanctions regime under the Zimbabwe Transition to Democracy and Economic Recovery Act, formerly Zdera. But industrialists, economists and legal experts yesterday said the introduction of the China International Payment System (CIPS) would bring efficiency in trade between Harare and Beijing.
The CIPS global payment system which provides cross-border transactions in Yuan intends to internationalise that currency and challenge the US dollar’s dominance. CIPS will accept payments in cross-border trade, direct investments, financing and personal remittances. Reserve Bank of Zimbabwe Governor Dr John Mangudya described the CIPS as a welcome development. “It’s a good alternative for encouraging trade,” he said.
“What we desperately need in Zimbabwe is productivity to benefit from such positive developments. We do not always need to talk of paying out but receiving forex. That is our liquidity.” Confederation of Zimbabwe Industries (CZI) president Mr Busisa Moyo said the development would go a long way in smoothening international trade.
“It’s a positive alternative because business options are always better than no options. The world is better off with alternatives and Zimbabwe certainly is better off. We all know that because of sanctions certain companies’ payments were held for cynical reasons. So it is better to have options of payment. “The problem at the moment is that when you wire in US currency they go through the United States’ settlement system. BRICs countries are the ones that are going to benefit more at the moment because ours is still in US currency so it will still go through Washington,” he said.
Economist, Mr Chris Mugaga said while the development would mainly benefit China, other countries would also benefit significantly. “Obviously with sanctions affecting some companies, now we will be able to go round the traditional power houses like Britain and America. “This is indeed a reprieve for weaker nations. It means that international payment will be more than just Washington and London. This way China will internationalise its currency.
“However, on the negative side, this could actually take the Chinese currency to be stronger than the US dollar which could result in Chinese goods becoming expensive since their currency will be on demand,” said Mr Mugaga. Harare lawyer, Mr Terrence Hussein said the CIPS was long overdue especially for countries such as Zimbabwe that have been reeling under illegal Western-imposed sanctions.
“US sanctions have made it easy for the US to regulate payment to Zimbabwe. They have control over us so if we trade in the Chinese currency, we will be able to by-pass Washington and London. “So for Zimbabwe in particular, it’s most welcome and long overdue. In fact, a number of countries in the world will breathe a sigh of relief,” said Mr Hussein.
Another lawyer, Mr Chris Mhike said: “The introduction of the CIPS is a welcome development in the global finance industry, particularly to the extent the new system provides an alternative payment platform. “When considered in the context of the desirability of free trade and financial infrastructural development, the creation of opportunities for choice is invariably positive. Zimbabwe’s public and private entities that embark on cross-border transactions that are denominated in the Yuan currency obviously stand to benefit from this development.
“With Zimbabwe currently in dire need of investment activity, and needing a boost on the international trade front, the introduction of this complementary network for settling trade-trade related deals in Yuan terms could be yet another opportunity for government and the business community, to steer the ship away from the economic malaise that currently characterises the local economy.”
Several Zimbabwean companies have lost millions of dollars to the US Treasury Department’s Ofac since the imposition of illegal sanctions on the country at the turn of the millennium. The Industrial Development Corporation lost over $20 million to Ofac while the Minerals Marketing Corporation of Zimbabwe had over $30 million seized.
Olivine-a subsidiary of IDC lost a $2million loan it had secured from the PTA Bank to capitalise while a Zimbabwean resident in Botswana had his $1 000 frozen. Last year, Ofac froze the Zimbabwe embassy account in the US, making it difficult for staff to access their salaries. The US also threatened to seize money from diamond sales in Europe after the EU bloc relaxed its sanctions regime.
The illegal sanctions regime is estimated to have cost Zimbabwe over $42 billion in revenue since the turn of the millennium.