eBusiness Weekly
Kudzanai Sharara and Golden Sibanda
Zimbabwe’s private sector has implored the US, world’s largest economy, to scrap economic sanctions imposed on Harare at the turn of the millennium and extended this year, as they have blocked access to cheaper foreign lines of credit and raised country risk profile.The country’s private sector also feels that with Zimbabweans desperate for economic advancement and in the absence of progress, pressure on politicians would be relentless, which may cause Government to take desperate measures to counter the sanctions.
This is according to Joseph Mtizwa, reputable former chief executive of Delta Corporation, Zimbabwe’s second largest listed company and leading beverages maker, and founder of leading Harare based business management consulting firm Pathway Africa.
Mtizwa made the remarks in a Zimbabwe private sector testimony to the United States Senate-Foreign Relations Sub-Committee on Africa and Global Health Policy-hearing, post the July 31, 2018 harmonised elections following an invitation extended by Senator Jeff Flake. His submission encapsulated a significant amount of input and views from Zimbabwe’s private sector.
The Senate’s Sub-Committee wanted to gain full appreciation of the economic situation in Zimbabwe, from a private sector perspective, and the implications of sanctions and failure by the global economic superpower to intervene in the situation obtaining in the country.
In his preamble, Mtizwa said Zimbabwe’s private sector was apolitical, but desirous of economic and political stability, stable environment conducive for business, reforms placing it as the engine for growth, investor friendly policies that are consistent and predictable, among others. Mtizwa said since independence Zimbabweans had gone through all manner of deprivations, such as political polarisation and violence, record beating hyperinflation, infrastructure decay, staggering unemployment levels, economic decline and rising poverty.
The former Delta CEO (2002-2012), who also chairs the Zimbabwe Stock Exchange listed companies Forum and several ZSE listed companies, said several macro-economic indicators showed the domestic economy was in distress. But he also noted the many positives.
Challenges included fiscal distress, chronic current account deficits large unsustainable public debt, infrastructure constrains, high country risk, currency volatility, rising inflation and deteriorating stands of living. Positives, Mtizwa said, entailed steady increases in manufacturing sector capacity, recovery in agriculture, mining output growth, indigenisation reforms and closure to the land tenure issues.
Mtizwa said while Government had significant efforts to reform the country, both political and economic with varying degree of success sanctions continued to retard economic recovery in Zimbabwe.
“In Zimbabwe trade sanctions impact negative on economic growth through denying the country access to foreign lines of credit, which ordinarily finance external trade and access to markets, particularly the USA market, through exclusion from AGOA,” Mtizwa said.
Mtizwa also said Zimbabwe’s export competitiveness was adversely affected by negative perception of the country, due to the debilitating effects of the nearly two decades long Zidera sanctions, resulting in high country risk profile translating into high country risk premiums.
“The Zimbabwe Democracy and Economic Recovery Act (Zidera) has proved to be a great obstacle for Zimbabwe to access (cheaper) foreign finance. USA financial institutions are not at liberty to provide well structured financial support against Zimbabwe’s minerals (gold, platinum, cobalt, lithium, etc) due to OFAC compliance rules,” Mtizwa said.
The ex-Delta CEO said as a result of Zidera sanctions passed by USA congress, Zimbabwean banks had lost over100 corresponding banking relationships in the last 10 years.
The same was true for banks in Europe due to compliance, reputation and association risks.
“Due to a combination of (USA and western) sanctions and its own bad track record of debt servicing, Zimbabwe is unable to access balance of payment support and credit and technical support from most of the major multi-lateral financial institutions,” Mtizwa added.
He said the private sector’s view was that the country’s failure to access long term concessionary funding from development finance institutions such as World Bank and African Development Bank, had created unsustainably large deficits in infrastructure development.
“The dilapidated state of all these constitutes a real tax on business by hardwiring inefficiencies into the entire economy. Businesses in agriculture, manufacturing, mining, tourism, financial services and others all desire to see sanctions removed so that country risk is reduced and access to affordable long term credit is restored while access to global markets is opened up,” Mtizwa.
The former business executive said Zimbabwe private sector was of the view that while sanctions were supposed to be targeted at individuals and entities, they had the unintended effect of pulling down the entire economy of Zimbabwe and welfare of its citizens.
