For the last two decades, Zimbabwe has been under United States of America and the European Union sanctions. So ruinous are the illegal economic embargoes that the country has lost and continues to lose investment opportunities, leading to destruction of livelihoods, companies and economy at large.
As presented to Cabinet recently by Foreign Affairs and International Trade Minister Dr Sibusiso Moyo, Zimbabwe lost US$98 billion in investment opportunities due to the illegal sanctions, debunking a Western myth that the embargoes have not harmed the economy because they targeted at individuals and a few entities.
The President of the Republic of Zimbabwe, Emmerson Mnangagwa, who is the chief steward of this country, is restricted from visiting certain Western countries or attending some key meetings to discuss investment opportunities for Zimbabwe, depriving ordinary Zimbabweans benefits being enjoyed by common people in other jurisdictions.
We therefore feel that the economic sanctions are designed to cripple all facets of the country’s economy.
Targeted State-owned companies such as National Railways of Zimbabwe, Minerals Marketing Corporation of Zimbabwe (MMCZ), Infrastructure Development Bank of Zimbabwe, Zimbabwe Defence Industries, among others, due to their centrality to Zimbabwe’s economic development, have been incapacitated.
Angered by the continued stay of the embargoes, countries in the Southern African Development Community (Sadc) will tomorrow join Zimbabwe in various activities condemning the two-decades-old sanctions, as per the resolution of the bloc a couple of months ago.
We say the sanctions should go now because they continue to curtail local firms’ access to offshore lending, stifle exports and choke efforts to attract Foreign Direct Investment, while local banks have been fined billions for facilitating transactions for local companies and individuals on US government’s Treasury Department’s Office for Foreign Assets Control (OFAC) sanctions list.
Although the Europen Union has also maintained sanctions on the country, so ruinous have been the global economic superpower America’s illegal embargo because it is supported by a very draconian law, the Zimbabwe Democracy and Economic Recovery Act (as amended in 2018).
The law is actually backed by the executive sanctions (Executive Order 13288) of 2003, that is reviewed annually by the US president — and so far three successive presidents have performed this punitive ritual every year.
zidera also has a clause that compels all Americans in executive or positions of influence in world bodies not to support any credit votes for Zimbabwe.
The sanctions, which the Americans and some gullible Zimbabweans say are targeted, have seen a large number of local firms failing to access offshore lines of credit, in the process, constraining their operations.
Loan inflows to Zimbabwean companies were about US$134 million in 1980 before surging to US$480 million in the 1990s, but fell drastically to US$80 million between 2000 and 2008 and for the private sector to secure financing, it is usually at punitive interest rates due to the high premium risk placed on Zimbabwe.
It is international best practice that companies enjoy relaxed payment periods when importing raw materials for production or plant and equipment and if the country is freed from the grip of the embargoes, the economy will grow exponentially.
Zimbabwean importers over the past two decades have been subjected to pay cash upfront in most cases, resulting in a squeeze on private sector cash flows and capacity utilisation.
In a recent paper to Cabinet, Foreign Affairs Minister Dr Moyo is quoted as saying; “Industry’s capacity utilisation fell from 76 percent in the 1980s to an all-time-low of 10 percent in 2008. The sector rebounded from 2009 to 2011 to about 60 percent before deteriorating again in 2015 with another rebound in 2016 to about 48 percent, which was attributed to import restrictions under the Statutory Instrument 64 of 2016.”
Unfortunately, due to the continued sanctions, there are indications that capacity utilisation for most companies has been falling again as many companies suffer from the effects of hyperinflation and foreign currency shortages. That is the reason why the world should support Zimbabwe’s call for the unconditional removal of the sanctions tomorrow.
The embargoes have created a negative perception the world over that Zimbabwe is a high risk country, thereby becoming a target for de-risking interventions by lending correspondent banks in the USA, Europe and other jurisdictions. By 2016 alone, 19 de-risking cases were recorded in 10 of the local banks leaving many struggling.
CBZ in 2017 was fined US$3,8 billion for facilitating transactions on behalf of ZB Bank, which was under ZIDERA sanctions and the penalty was reduced to US$385 million following negotiations.
In fact, ZB one of the strategic companies that had sanctions lifted said it could not provide certain services for clients such as arranging lines of credit, facilitating exports and accessing correspondent banking services, because of sanctions.
Standard Chartered Bank succumbed to the sanctions and closed about 16 branches countrywide, remaining with three after it was fined US$1,1 billion for facilitating transactions in countries including Zimbabwe.
Some banks had accounts for clients frozen, while all contracts and business relationships with US citizens and corporates were abrogated. In 2016, Agribank said the reputational damage caused by sanctions meant that it struggled to find an equity partner and had lost a US$98 million line of credit.
The Small and Medium Enterprises Development Corporation had its US$3 million blocked by OFAC, while individuals who had money destined for Zimbabwe had it intercepted.
These developments are a call for all Zimbabweans citizens including corporates to stand up tomorrow and condemn the sanctions since no one is being spared.
The IDC lost over US$20 million, while its fertiliser subsidiary company Chemplex still has its US$5 million frozen. A total of US$2 million belonging to another chemicals companies was also intercepted. Zimbabwe’s economy is agro-based and the sanctions are meant to completely obliterate the economy.
Another source of revenue, diamonds, has also been soiled over and above the MMCZ losing over US$30 million in revenue to OFAC.
This is therefore a call for all Zimbabweans to condemn the sanctions tomorrow.