The post-Mugabe regime in Zimbabwe continues to struggle to establish its legitimacy. While this is the case the terms of its future international re-engagement will continue to occupy the Zanu-PF government.
The government’s problems are compounded by the international outcry over its brutal response to the protests against massive fuel price hikes in January. At least 16 people died and hundreds were wounded from ‘gunshots, dog bites, assaults and torture".
The events of January once again underscored the fault lines in Zimbabwe’s foreign relations. One the one hand the Southern African Development Community came out in support of a member state in the face of clear evidence of state brutality against its citizens. It even went so far as to condemn the continuing “illegal sanctions” against Zimbabwe.
In contrast, the UK, EU and the US all condemned the human rights abuses of the Zimbabwean state. They called for a return to the commitment to political and economic reforms. And they renewed their calls for as inclusive, credible national dialogue to map the way forward.
These responses once again show how polarised regional and western government policies are on the Zimbabwe crisis. This has had another consequence – the sidelining of efforts to reach a consensus on economic and political reforms. There have been at least three efforts at some sort of reconciliation over the past decade. The first was during the Global Political Agreement (2009-2013), again in the aftermath of the November 2017 coup, and then again in the run up to the 2018 elections.
Another consequence of the fallout from January is that Mnangagwa’s government has reached out further to its authoritarian economic and political partners in Eurasia. The problem with this is that linkages with other autocratic regimes provide some protection against forces pushing for democratic change. In addition, these relationships tend to consolidate those in the military and business sectors who see any prospect of serious economic and political reform as a threat.
A statement issued by the current head of the Southern African Development Community repeated the official position of the Zimbabwe government. It criticised “some internal players, in particular NGOs, supported by external players (who have) continued to destabilise the country.”
Early signs of this position were clear in South African President Cyril Ramaphosa’s speech at the International Labour Organisation in January. He claimed that sanctions against the country were no longer necessary because the government had “embarked on democracy”.
Once again the regional body has conflated genuine concerns over imperial interventions in the developing world with the fight for democratic and human rights by national forces. Like Zanu PF – both under former President Robert Mugabe and Mnangagwa – Southern African Development Community has affirmed its support for a selective anti-imperialist narrative by an authoritarian nationalist regime that conflates the fight for democratic rights with outside intervention.
The response from the EU couldn’t have been more different. A resolution of the European Parliament in mid-February strongly condemned the violence and excessive force used in January. It reminded the government of Zimbabwe that long term support for it is dependent on “comprehensive reforms rather than mere promises”.
The resolution also called on the European Parliament to:
(review restrictive measures against) individuals and entities in Zimbabwe, including those measures currently suspended, in the light of accountability for recent state violence.
This position in effect put on hold any new restrictive measures against the Zanu-PF government. It also left open the option for renewed dialogue.
The debate on sanctions on Zimbabwe has been lost in the region and on the continent. And this solidarity with the Mnangagwa regime is likely to persist for the foreseeable future.
Change, if any, might come from the EU and US. It’s possible that they could change their positions again if the Mnangagwa government made another attempt at minimalist reforms.
The current US policy in Africa is targeted against what it considers to be the “rapidly expanding” financial and political influence of China and Russia on the continent. Trump is also looking to make the US the major player in the new battle for metal resources in Africa. This new struggle for technology metals is taking place in countries such as Zimbabwe, the Democratic Republic of Congo, South Sudan, Tanzania and Sierra Leone.
The White House announced this week that it has extended sanctions against Zimbabwe for another year. Nevertheless, at some stage the politics of US strategic interests in Africa could lead to a more accommodating relationship with an authoritarian regime such as the Mnangagwa administration. This has happened on many occasions in its foreign policy interventions.
The EU is in a “wait and see” mode. It will need evidence of some notable movement by the Zimbabwean state on the political and economic reform front before it pushes the re-engagement process forward.
Mnangagwa’s regime has yet to show that it is any different from Mugabe’s. Given the continuing factional battles in the ruling party – and its inability to imagine itself out of power – it is difficult to view the current government as anything other than a continuation of the authoritarian Zanu-PF’s legacy.
Almost two decades of profligate monetary policy has destroyed Zimbabwe's economy and fueled rampant inflation, decimating the savings of its people twice.
Hyperinflation of as much as 500 billion percent in 2008 made savings worthless and led to the abolition of the local currency in favor of the dollar the following year. In 2016, former President Robert Mugabe's cash-strapped government introduced securities known as bond notes that it insisted traded at par with the dollar. In 2018, it separated cash from electronic deposits in banks without reserves to back them, causing the black-market rate to plunge.
Last week, it threw in the towel and allowed bond notes to trade at a market-determined level, once again slashing the value of savings. The decision came after the southern African nation faced shortages of bread and fuel, was hit by strikes and protests, and President Emmerson Mnangagwa's drive to attract new investment floundered.
"At the root of this is the currency crisis," said Derek Matyszak, a Zimbabwe-based research consultant for South Africa's Institute for Security Studies. "This is analogous to them creating a giant Ponzi scheme that originated under Mugabe. What we are seeing now is that Ponzi scheme collapsing."
The latest step, while welcomed by what's left of the country's business sector, is unlikely to solve Zimbabwe's problems because all it does is reflect exchange rates on the black market, according to Steve H. Hanke, a professor of applied economics at Johns Hopkins University in Baltimore.
"The 1-to-1 is a fiction," Hanke said. "They are saying officially we are going to condone what has been happening anyway. It officially says, 'we robbed you.'"
The interbank rate for the new currency is about 2.5 to the dollar, data published on the central bank's website shows. That figure is meaningless because the authorities are failing to divulge the volume of trade, according to marketwatch.co.zw, a website run by financial analysts. It estimates the black-market rate for the bond notes is 3.31 per dollar.
The origins of Zimbabwe's currency crisis stretch back to a violent land-reform program initiated by Mugabe in 2000, which slashed export income and devastated government finances.
In response, then-Reserve Bank of Zimbabwe Governor Gideon Gono, known as 'God's banker' because of his close ties to Mugabe, increased printing of Zimbabwe dollars exponentially to pay government workers, stoking inflation and eventually making the currency valueless.
"It was a Ponzi scheme in the past," said Ashok Chakravarti, an economist and lecturer at the University of Zimbabwe. "Especially in the Gono era, where that chap just kept printing money." Gono didn't answer a call to a mobile phone number he has used in the past.
The currency's collapse led to the predicament Zimbabwe now finds itself in -- chronic cash shortages and rampant inflation.
By late 2008, some Zimbabweans had reverted to barter trade as illicit dealings in foreign currencies flourished. In February 2009, the answer the government came up with was to switch to the use of foreign currencies, mainly the U.S. dollar.
"Dollarization puts a hard budget constraint on the system," said Hanke. "You can't go to the central bank or any other government institution to get credit for the government."
The pressure on government finances led to history repeating itself, with a loophole being found: the introduction of bond notes and locally denominated electronic money. That contributed to money in circulation growing to more than $10 billion, according to George Guvamatanga, the permanent secretary in the Finance Ministry. The figure was $6.2 billion in 2013, said Tendai Biti, a senior opposition leader and former finance minister.
"If you continue to print money you are destroying what you are creating," Guvamatanga said. Under a stabilization program introduced by Finance Minister Mthuli Ncube in October, the government is now repaying domestic debt, has stopped issuing Treasury bills and has no overdraft with the central bank.
That's helped the economy move toward "walking on two legs, there is an effort to go in a different direction. It's an inevitable adjustment." Chakravarti said. "It's very unfortunate that this is the second time in 10 years people have lost the value of their savings. In 2009 we all went down to zero including me."
For some observers the latest development isn't a sudden discovery of fiscal discipline. It's another admission of failure and the victims are Zimbabwe's people.
To Biti, who says the new currency will fail because it isn't backed by reserves, it shows the country has come full circle.
"They have through the back door reintroduced the Zimbabwe dollar," he said. "It's theft because people had regrouped and rebuilt their lives from zero based on the U.S. dollar."
The country's best hope is to join southern Africa's Common Monetary Area, which is dominated by South Africa and its rand, Biti said. That would give certainty to business and impose fiscal discipline on the government, as opposed to the current arrangements that are unsustainable, he said.
"It's a Ponzi economy," he said.
Zimbabwean and South African officials will meet next week, as preparations for the visit by South Africa's President Cyril Ramaphosa to his northern neighbours gather momentum.
President Ramaphosa will visit Zimbabwe on March 12 for the Third session of the two countries' Bi-National Commission (BNC), and Zimbabwe's Ambassador to South Africa Mr David Hamadziripi said yesterday that preparations for the visit were underway in both Harare and Pretoria.
The two countries held their last BNC in October 2017 and the visit by President Ramaphosa will give a lift to the already existing strong bilateral relations.
"We are going to have meetings with relevant South African officials next week to prepare for the BNC," he said.
"It is important to note that the BNC, which last met in Pretoria in October 2017, will review co-operation across the board.
"We expect issues around trade and investment, energy, transport, health, security and defence among others to be the major talking points."
He said one of the major issues expected to dominate the discussions was the establishment of a One Stop Border Post (OSBP) at Beitbridge. Under the concept travellers will be cleared once for passage into either country as opposed to the present situation where travellers have to queue twice at either side of the border to complete the same processes, which slows down the movement of cargo and human traffic.
Zimbabwe and South Africa enjoy cordial relations dating back to the days of their struggle for liberation. There is also likely to be a strong geopolitical flair as South Africa, the most influential neighbour and Africa's strongest economy, will likely throw weight behind Zimbabwe on the back of external pressures against the country, notably regarding illegal sanctions imposed on the country by the West.
Last week, the 28-member European Union bloc reviewed its restrictive measures on Zimbabwe, which was but a small token amid opposition to the embargo from progressive forces.
South Africa's Minister of International Relations and Cooperation Lindiwe Sisulu this week revealed that South Africa remained ready to help Zimbabwe, underscoring that the regional giant had a strong interest in having Zimbabwe as a peaceful and prosperous neighbour. She said of sanctions against Zimbabwe was central to this and that sanctions would feature in the discussions between Presidents Mnangagwa and Ramaphosa. President Ramaphosa has been a strident anti-Zimbabwe sanctions campaigner himself.
Last month, he took the campaign to the 49th edition of the World Economic Forum (WEF) in Davos, Switzerland, where he publicly called for the lifting of the embargo. Last year, he also called on the European Union (EU) to lift sanctions on Zimbabwe during the 7th South Africa-European Union Summit in Brussels, Belgium, where they discussed a number of issues around trade, climate change, women's rights among other global issues.
The EU and the United States of America maintain sanctions on Zimbabwe, with the EU having progressively loosened the measures. The US remains adamant, tying the punishment of Zimbabwe and Zanu-PF to give an advantage to the opposition MDC-Alliance.
Zimbabwe’s decision to scrap a peg between its quasi-currency bond notes and the U.S. dollar brings a welcome end to a failing monetary policy, but it is not the solution to a deeper crisis, economists said on Thursday.
The Reserve Bank of Zimbabwe (RBZ) on Wednesday said it would carry out a “managed float” of the surrogate bond notes and electronic dollars, effectively creating a national currency for the first time since adopting the U.S. dollar in 2009.
The bond notes and electronic dollars will be known as a separate currency called RTGS dollars.
Banks were closed for a public holiday on Thursday.
Street traders said there had yet to be any change on the black market, where one U.S. dollar still costs around 3.5 bond notes and $4 in electronic funds.
“I think if the RBZ manages to keep liquidity low the rate will definitely stabilise,” one trader said.
Due to a desperate lack of hard currency, the bond notes and notional dollars in the electronic banking system have been steadily dropping in value on the street, worsening the hardships of ordinary Zimbabweans as inflation soared.
Many foreign traders have stopped accepting bond notes as legal tender, leaving businesses such as millers, brewers and miners hamstrung. A more realistic approach will be welcomed by investors and foreign donors but it will not reverse the currency crisis, experts said. The RBZ only has enough foreign exchange for two weeks of imports.
“The fact that officials finally came to their senses and ditched the notion that Zimbabwe’s quasi currency was at par with the US dollar, is comforting,” said Jee-A Van Der Linde, analyst at NKC African Economics.
“With consumer prices soaring, significant amounts of multilateral debt arrears, virtually no foreign reserves, and confidence at rock-bottom, Zimbabwe’s problems are still far from over – nor is the road ahead any clearer.”
The RBZ hopes its new measures will temper demand for dollars on the black market and ease inflation as the new currency settles at fair value. This will only work if the central bank can access foreign exchange on international markets, which it says it has secured. Many Zimbabweans have their doubts.
“What they have done is to reintroduce the Zimbabwe dollar without the name. We have seen this before, it will lose value very soon,” said James Mawire, a manager at a firm that sells mining equipment.
“What is lacking, and which is most important, is confidence in the government. People don’t trust the government and the Reserve Bank.”
Though the RBZ said it had accessed sufficient lines of credit to buttress the exchange market, it provided few details.
“There are many questions that remain unanswered,” said Tony Hawkins, professor of business studies at University of Zimbabwe.
“This is a step in the right direction but it is not a solution. What they need is a large supply of dollars, without that this will not work. So you call this a bandage and not a cure.”
Zimbabwe's government has shelved plans to fully join the Africa Continental Free Trade Area (ACFTA) so that it could find space to stabilise local industry which is struggling to produce enough quality goods to compete outside.
This was revealed by Industry and Commerce Ministry's director of International Trade, Beatrice Mutetwa while addressing parliamentarians last week.
"We have requested for time out of the ACFTA because our local industry is not producing enough to be able to compete with other countries.
"We have requested for between 13 to 15 years and thereafter, we will be able to compete with our continental counterparts," she said.
Mutetwa said Zimbabwe was in a peculiar position and needed to work towards achieving an even landscape. This, she said, was unlike the current situation which only makes the country a market place because it lacked locally manufactured products.
"We need to focus on the industry pillar and infrastructure because we cannot just open up our markets without looking at the supply side. Otherwise we may end up becoming a market for others," Mutetwa said.
Member countries are requested to open up 90 percent of their markets but Zimbabwe had only offered up 85 percent as considerations are still being made on how the key sectors like tourism and mining will be protected.
ACFTA is the brainchild of the African Union and was initiated in 2012 with the objective of establishing a single trading bloc which enjoys lowered trade barriers across the continent.
The organ will take advantage of the existing regional blocs like SADC which will eventually be unified in the creation of the free trade area.
It is set to bring together the continent's 55 nations, creating a total 1 billion customers for Africa's goods and services through a lucrative $3.4 trillion Gross Domestic Product.
The initiative also seeks to accelerate trade between African nations as opposed to the current scenario where intra-continental trade is at its lowest.
- New Zimbabwe
A US$3 billion platinum deal between Zimbabwe and Russia is now mired in controversy after it emerged this week that the funding for the project will come from African Export-Import Bank (Afreximbank) institutions and African Finance Corporation.
Sources in the mining sector told businessdigest this week that the platinum mining venture will not be financed by Russian capital.
According to sources, government entered into a memoranda of understanding between Afreximbank and Great Dyke Investments (Pvt) Ltd concerning the Darwendale Platinum Group Metals Project in Zimbabwe.
Another memorandum of understanding was signed between the African Finance Corporation and Great Dyke Investments (Pvt) Ltd for the Darwendale Platinum Mining Project.
"This deal is going to be funded by African money. All this talk about Russia financing this deal is just propaganda. The question we ought to ask is obviously around whether Zimbabwe needs Russia to get funding on this particular deal," a source said. "Government has basically given away platinum rights to the Russians for no monetary value."
The disclosures have brought into question Russia's contribution to the deal.
Sources say government could have gotten funding from Afreximbank and African Finance Corporation.
Great Dyke Investments chairperson Hesphina Rukato said she expected financial closure on the deal by June.
"Working financial closure is expected to be in June and then we expect construction is going to start in July," Rukato said before requesting questions in writing last week.
At the time of going to print, Rukato had not responded to enquiries sent to her via email last week.
Rukato accompanied President Emmerson Mnangagwa on a trip to Russia last month that saw the signing of the controversial deal.
In a report back on Mnangagwa's state visit to Russia, Belarus, Azerbaijan and Kazakhstan last month, Information minister Monica Mutsvangwa confirmed agreements had been signed with Afreximbank and Africa Finance Corporation but did not elaborate on the actual details.
Mines minister Winston Chitando confirmed agreements with the two financial institutions had been signed, but said he did not have specifics on the deal.
"I don't have actual specifics but I know that Great Dyke entered into an agreement with the financiers and they have two separate agreements. You would need specifics from Dr Rukato," he said.
Asked what the Russians were bringing to the table, he said he did not have actual details of the deals.
"There is no project, especially one of this size, that can be funded only by equity. Such a venture would require a combination of equity and capital. I don't have the actual numbers, but projects that size normally require debt financing," Chitando said.
Additional efforts to seek a comment from Rukato were fruitless yesterday as she claimed to have been travelling since last week.
"I will get the team to look into them today as I have been travelling," she said.
Great Dyke Investments is a joint venture company between the Russians and Zimbabweans in the Darwendale platinum project. Pen East Investments and Russia's JCS Afronet are said to have commissioned the platinum mining project in 2014 but to date the deal has not moved an inch.
The project is expected to haul at least one million ounces of platinum per annum. At least 15 000 jobs are expected to be created when the company starts operating at full capacity.
Large-scale exploration works at the Darwendale deposit commenced in January 2015. GDI had planned to drill over 300 000 running metres, making it one of the biggest exploration ventures in Zimbabwe.
The scope of work was designed to prove the deposit resources in indicated category for longer than a 20-year mining period. The Darwendale deposit resources have been estimated at 40 million ounces of platinum group metals (PGMs).
The initial scope of the project entailed the phased construction of a complex for mining and concentration of 10 million tonnes of ore per annum, and a smelter to enable production of up to 800 000 ounces (25 tonnes) of PGMs in the form of converter matter as final product.
At optimum capacity, the project was expected to require an investment of up to US$4,2 billion. GDI plans to set up a refinery in line with the government's thrust on value addition. Apart from the Russian deal, government also signed an agreement with Great Dyke Investments (Pvt) Limited.
Source - The Independent
Zimbabwe's government continues to explore avenues of attracting lines of credit from neighbouring South Africa after the continent's most prosperous nation rebuffed an earlier request by Harare for a R16 billion (US$1,129 billion) rescue facility, Finance minister Mthuli Ncube has revealed.
South Africa has emerged as the only hope for President Emmerson Mnangagwa's administration for a financial lifeline after several countries, including China, spurned its approaches, citing Harare's tendency to default on debt repayment.
Ncube confirmed in an interview this week that several meetings he held with his South African counterpart Tito Mboweni have so far failed to convince the regional economic giant to commit itself to rescuing Zimbabwe.
"There is no commitment, but we have ongoing discussions," Ncube said, adding government would welcome any form of financial assistance from south of the Limpopo.
"We are in constant talks with South Africa, they are our neighbour, biggest trading partner and we have a bi-national commission. So we have been interacting with them, to see whether they can be of help and support us whenever we need it," he said.
The Treasury boss said government remained hopeful in the face of shrinking sources of credit.
Although there remains a possibility of South Africa extending a US$7 million credit facility to clear part of Zimbabwe's World Bank arrears, the neighbouring country appears reluctant.
Mnangagwa told private media journalists a fortnight ago that: "We started engaging South Africa earlier this year when we had the cooking oil shortage. Then because of the nature of relations between us and South Africa, we said to South Africa can you give us lines of credit. So this is why discussions between the South African minister of finance, our own finance minister and the governor of Reserve Bank of Zimbabwe started."
"Talks are therefore underway for a line of credit from South Africa Botswana has also given us line of credit worth 70 million Pula. What it means is that Zimbabwean businesses can get goods from those two countries worth that amount. We are then given a grace period and then we could be able to repay the credit within an agreed period of time, say to or five years. It is different from a bailout package in that it does not come with certain conditions attached to it," he added.
While critics in South Africa say lending to Zimbabwe would be a waste of money, President Cyril Ramaphosa has over the past week said there is need to support Harare.
However, he has not qualified the kind of support he would prefer.
Zimbabwe is desperate for lines of credit which could go a long way in fixing a tattered economy, which is on the verge of total collapse. Foreign currency shortages continue to haunt industry while the cost of living has soared.
To worsen the situation, Harare's biggest Western cheerleader Britain pulled the plug on Mnangagwa's re-engagement drive when London dissociated itself from the regime last week following the killing of an estimated 17 people during the suppression of violent protests which rocked the country last month while 78 others were injured and more than 1 000 were arrested.
Britain, a key Mnangagwa ally after the toppling of former president Robert Mugabe in the November 2017 coup, had also emerged as the only Western power supporting Zimbabwe's re-engagement with IMF, World Bank and re-joining Commonwealth.
Although Mnangagwa has denied that the country is seeking a bailout package, former finance minister Patrick Chinamasa revealed on a trip to China last year that government was seeking a rescue package of US$2,5 billion to support the productive sectors which include tourism, mining and manufacturing.
Acting Chinese ambassador Zhao Baogang said that they will not give Zimbabwe a bailout package, focussing instead on sponsoring infrastructural development.
Source - The Independent