eBusiness Weekly
Taking Stock
The extension of United States sanctions on Zimbabwe soon after the 2018 harmonised elections has sparked a fierce public debate on both social and mainstream media on whether they are justified or not and also on what impact they will have on the generality of Zimbabweans.
US President Donald Trump, last week signed into law the Zimbabwe Democracy and Economic Recovery Amendment Act of 2018’ (Zidera Act), which amends the Zimbabwe Democracy and Economic Recovery Act of 2001.
The new law, which is meant to extend sanctions that were imposed on Zimbabwe back in 2001 lays out US expectations for a free and fair election.
“The expectations of the 2001 legislation hold true today — Zimbabwe must make credible progress towards holding free and fair elections, restore the rule of law and ensure military subordination to the civilian government, among other desperately needed reforms,” said the US in a presser released by its Foreign Affairs Committee ahead of elections.
Following the signing into law, debate sparked on whether the sanctions were justified and whether they would achieve anything or will only entrench the suffering of the masses.
For a country that has been under sanctions since 2001, one would expect a general understanding that sanctions do not work and in most cases only hurt those it seeks to protect.
According to respected Professor Steve Hanke, writing on his twitter handle, “all sanctions do is inject volatility into global markets, entrench tyrannical governments, spawn criminal networks and punish the impoverished.”
“Sanctions are economically illiterate and punish innocent civilians rather than targeted governments. Often times the political elite get rich while the ordinary citizens are left to live off scraps. It’s time to call sanctions what they are: war crimes,” tweeted Hanke.
All what sanctions do is to slow down and destroy economic growth, while producing new uncertainties, something which the authors of the latest sanctions extension fully understand, but unfortunately many among locals choose to ignore, blurred by political ambitions and affiliations.
In an interview on China Global Television Network, one of the proponents of the latest sanctions extension, Chris Coons, admits that the imposition of sanctions on Zimbabwe will prevent the country from re-establishing robust economic ties.
Asked on what effect the lifting of sanctions will have on the southern African country, Coons said removing sanctions on Zimbabwe will provide significant economic lift for the country as it will encourage foreign direct investment and re-establishment of robust economic ties.
In other words, Coons is admitting that the imposition of sanctions will discourage foreign direct investment, establishment of economic ties as well as dampen re-engagement processes, all three being key to President Emmerson Mnangagwa’s efforts to change the fortunes of the country for the better.
According to Coons as long as there are significant sanctions in place by Western countries, it makes it harder for the country to access capital and even harder to attract the sort of interest and engagement that will revive the Zimbabwean economy.
He is right, sanctions negatively affect the image of the country through negative perceptions by international financial markets, making it difficult for Zimbabwean companies to access lines of credit because of the perceived country risk. Negative publicity adversely affect investment levels into the country, thus, accentuating the foreign exchange shortages currently bedevilling the country.
This should be enough evidence that sanctions are meant to scupper economic growth something which any progressive Zimbabwean, no matter political differences, should not wish upon the nation.
As Minister of Foreign Affairs and International Trade Dr Sibusiso Moyo said, politics in a country should not lead to the suffering of the masses.
“The sanctions are for the benefit of the MDC Alliance, not for the ordinary person suffering on the streets. If people suffer because of you then you are not a leader.”
There is no need to be philosophical about sanctions as the effects are tangible. In fact the record of economic sanctions in forcing political change is dismal, but as a way of reducing a country to poverty and misery it is difficult to beat.
Former United Nations, Secretary General, Kofi Annan, once bemoaned the adverse effects of sanctions, when he said ‘sanctions remain a blunt instrument, which hurt large numbers of people who are not their primary targets’
In Zimbabwe sanctions, whether disguised in any form, ultimately resulted in health services, shortages of drugs, and high infant mortality rates. Innocent civilians were thus, adversely affected by the sanctions.
According to the RBZ, sanctions have also had adverse and downstream social and economic effects on the Zimbabwean economy’s key sectors. Most of these effects have manifested themselves in shortage of foreign currency, resulting in the country accumulating external payment arrears and failing to import critical supplies.
For years one of the country’s financial institutions ZB Financial Holdings, among other companies, was a Specially Designated National (“SDN”) which meant that it was not allowed to deal with any US company or US citizen in matters of business.
An entity or individual listed on the SDN list is prohibited from transferring, paying, exporting, withdrawing, or otherwise dealing in the property or interests in property with US persons, or in or involving the United States.
While ZB Financial Holdings chief executive officer Ron Mutandagayi was not available to quantify the financial impact of the SDN on its operations, he is on record saying the OFAC sanctions had virtually crippled the bank’s capacity to process international transactions as well as accessing effective lines of credit from multilateral financiers.
Zimbabwe Stock Exchange-listed entity CBZ Holdings Limited is currently trading under a cautionary statement with regard a regulatory matter which one of the Company’s subsidiary is involved in, which is under discussion and may, on finalization have an impact on the value of the Company’s shares.
While CBZ has not openly said what the regulatory matter involves, the market understands the matter is to do with a $3,8 billion fine for thousands of financial transactions done on behalf of ZB Bank then under economic sanctions imposed by the world’s largest economy.
“The Company acknowledges that OFAC issued a Pre-Penalty Notice which required the Bank to respond to their observations relating to transactions carried out by the Bank on behalf of its clients banking with other institutions. For the record, these payments by the Bank were for clients that are not on the OFAC Sanctions List and as such the Bank has shown cause why it should not be subjected to any penalty,” said CBZ in a statement
It is, however, believed that after some CBZ mitigation through its lawyers, the United States Treasury’s Office of Foreign Assets Control (Ofac) reduced the amount to $385 million, which still remains heavy considering the Zimbabwe’s banking sector crisis. As of Thursday this week, CBZ was still trading under cautionary.
