The economic sanctions imposed on Zimbabwe by America and her allies are designed to simultaneously cripple all facets of the country’s economy and Government initiatives being employed cannot yield desired results if the embargoes are not unconditionally removed.
By Hebert Zharare
Nationals from Southern African Development Countries (Sadc) tomorrow join Zimbabwe in various activities condemning the two decades old embargoes imposed on the country after a bilateral tiff with Britain over land reform among other issues.
Their continued stay has curtailed local firms’ access to offshore lending, stifled exports, choked the country’s efforts to attract Foreign Direct Investment, while local banks have been slapped with billions worth of fines for facilitating transactions for local firms and individuals who are on US Government’s Treasury Department’s Office for Foreign Assets Control (Ofac) sanctions.
In its dossier prepared recently, the Ministry of Foreign Affairs and International Trade gave a blow by blow analysis on how American sanctions through the Zimbabwe Democracy and Economic Recovery Act (2001), backed by the Executive Sanctions (Executive Order 13288) of (2003) which is reviewed annually by the US President, have suffocated Zimbabwe.
The sanctions, which Americans have disguised as targeted, have seen local firms failing to access offshore lending, in the process, shrinking their operations and retrenching workers.
Reads the dossier: “Pre-sanctions era, loan inflows to Zimbabwean companies increased from USD$134 million in 1980 to US$480 million in the 1990s, but fell significantly to an average of US$80 million between 2000 and 2008.
“Currently, where the private sector manages to secure offshore financing, it is usually at punitive and exorbitant interest rates.”
It is international best practice that companies enjoy relaxed payment periods when importing raw materials for production or plant and equipment to expand their businesses.
However, that has not been the case with Zimbabwean importers over the past two decades who have been subjected to pay cash upfront in most cases, resulting in a squeeze on private sector cash flows.
This has led to bigger challenges, including low capacity utilisation of Zimbabwean companies.
“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.”
However, due to the continued stay of the sanctions, there are indications capacity utilisation for most companies has been falling as many suffer from the effects of hyperinflation, foreign currency shortages among other challenges.
Again, due to declining external budgetary support, Zimbabwe’s budget deficit has largely been financed from domestic borrowing, which has triggered hyperinflation.
The economic embargoes have created perception that Zimbabwe is a high risk country, thereby making the country a compelling target for de-risking interventions by lending correspondent banks in the US, Europe and other jurisdictions.
As such, in 2016 alone, 19 de-risking cases were recorded in 10 of the local banks.
In the same year, Ofac fined Barclays Bank US$2,48 million to resolve potential civil liability for 159 alleged violations of the sanctions regulations by facilitating transactions that took place between July 2008 and September 2013.
CBZ in 2017 was slapped with US$3,8 billion fine by Ofac for facilitating transactions on behalf of ZB Bank, which was under Zidera sanctions and the penalty was reduced to US$385 million after serious negotiations.
Standard Chartered Bank that closed about 16 branches countrywide recently and only remaining with three, was also fined US$1,1 billion by the same US department for facilitating transactions in many countries although Zimbabwe’s exposure was US$18 million.
“Another bank had funds in all foreign bank accounts and in transit from or to clients frozen, while all contracts and business relationships with US citizens and corporates were abrogated. Its US$5,8 million was blocked, contracts for various provisions terminated, licensing for core banking systems proscribed, support agreements discontinued and correspondent banking relationships terminated.
“Hence, the bank could not receive or send money outside the country while credit lines immediately dried up. Dealings with credit card issuers such as VISA and Master card were prohibited,” reads the document.
AgriBank and Infrastructure Development Bank also suffered the sanctions carnage. In 2016 the agriculture bank 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, over and above individual Zimbabweans who had money destined for Zimbabwe intercepted.
As the country marches tomorrow denouncing the sanctions, it is incumbent upon all Zimbabwean businesses to rally behind government as private sector investments continue to also suffer due to the embargoes.
Many companies, mainly State Owned companies, suffered the brunt of the sanctions most.
The Industrial Development Corporation lost over US$20 million to Ofac, while its fertiliser subsidiary company still has its US$5 million frozen.
A total of US$2 million belonging to another chemicals company was also intercepted.
The Minerals Marketing Corporation, a state-owned company responsible for marketing the country’s minerals lost over US$30 million in revenue to Ofac.
“A private company lost US$2 million it had secured from the PTA Bank to recapitalise and the firm is currently struggling to produce some of its basic household products.
“Foreign direct inflows increased significantly from an average of US$8 million per year in the 1980s to an average of US$95 million in the 1990s, but declined to about US$20 million per year after 2000.”
However, some law experts say no matter how long it may take, Zimbabweans can mount lawsuits and claim back their confiscated money. – Herald