The Sunday Mail
Business Reporter
South Africa’s discussions with Zimbabwe are centred on how best the two southern African countries can help each other confront the challenges being faced by the latter, a senior South African Government official has said.
In an interview with SABC news, on the side-lines of the World Economic Forum recently held in Davos, Switzerland, South Africa’s Finance Minister Tito Mboweni, said discussions, which his country had started with fellow government officials from Zimbabwe, were mainly focused on finding possible solutions to the challenges confronting its neighbour.
Zimbabwe has been going through an array of challenges highlighted by Finance and Economic Development Minister Mthuli Ncube in the Transitional Stabilisation Programme (TSP) as a huge foreign and domestic debt overhang, a huge trade deficit, a ballooning fiscal deficit and cash shortages among others.
“The major challenge relates to the unsustainable and prolonged fiscal deficits that perpetuate uncontrolled domestic borrowing, and feeding into vulnerabilities for the financial sector and the rest of the economy and thereby, posing macro-economic instability,” reads part of the TSP.
To this regard, Mr Mboweni said; “We started this current conversation on the 21st of December last year and we are continuing these conversations to try and find possible solutions that confront Zimbabwe.”
Mr Mboweni said Zimbabwe did not exist in isolation and its problems, in one way of the other, affected neighbouring countries.
“These are conversations (that we are having) because the difficulties that Zimbabweans confront, also have implications for South Africa and Zimbabwe is a member of SADC, is our neighbour, and whatever our neighbours are confronting, also affects us and, therefore, a conversation about their challenges is really very important,” he said.
South African President Cyril Ramaphosa while in Davos, said sanctions imposed on Zimbabwe are stifling the country’s economic growth.
Mr Mboweni also called on sanctions imposed on Zimbabwe since 2001 to go as they have resulted in investors shunning the Zimbabwe.
“Basically, what are the challenges facing Zimbabwe, firstly the sanctions against Zimbabwe, which the political leadership is leading the effort to get them lifted. Once sanctions are lifted this provides a good platform for the other policies that Zimbabwe wants to put in place to take root.”
Zimbabwe, in line with its “Zimbabwe is open for business mantra,” is looking at implementing policies that it believes will uplift it from economic challenges and leverage towards upper middle income status by 2030.
Mr Mboweni revealed that the two neighbouring countries were also having discussions around the country’s financial services sector including its national settlement systems.
In the last few years Zimbabwe has been struggling to make foreign payments having lost correspondent banking relationships with leading global banks. By July 2017, the country had lost at least 50 foreign correspondent banks since 2008 because of compliance issues and sanctions.
Mr Mboweni said discussions were also around understanding what banking, finance, national payments and settlement systems challenges that Zimbabwe confronts and “how are they going about resolving those.”
“And thirdly related to the second one is how should Zimbabwe go about introducing a domestic currency which should be important in the process of oiling the economy, sorting out the national payments and settlement systems to make it easier for people to buy goods and services and so on,” said Mr Mboweni.
Prof Ncube says Zimbabwe has already set the ball rolling in its efforts to introduce its own currency which he said will be introduced soon.
On Zimbabwe’s debt, Mr Mboweni said South Africa had been in a similar position in the past and can share one or two notes to help Zimbabwe deal with its own arrears upwards of $16 billion both local and foreign.
“We have had some experience in South Africa when we started in 1994, South Africa faced a huge external debt and we had to deal with that issue, so we can exchange ideas about how we went about dealing with that matter and so on,” he said.
Among other challenges Zimbabwe is having is in the productive sector, which has been on the low side, with Zimbabwean retailers stocking more than 50 percent foreign products. Industry capacity utilisation in the country was measured at 48,2 percent in 2018, but is currently facing a lot of headwinds.
“At the end of the day, it is about how do we get the productive sector in the Zimbabwe economy to start moving, how do we get agriculture back on track, how do we get the manufacturing sector back on track, how do we get the mining sector back on track, (and for) everything to start working in Zimbabwe again,” said Mr Mboweni.
“Things use to work in Zimbabwe, but unfortunately things have broken down and the conversation we are having really is exchanging ideas and thoughts about what might need to be done.”
Mr Mboweni, however, said the two countries had not reached a point where they discussed a bailout or a loan.
“Zimbabwe has a very small facility at the South African Reserve Bank, and if those conversations lead to a situation where that facility can be expanded, I think that will be good.
‘But I think we have not reached that point yet and it’s important not to run ahead of ourselves, there is no bail out being discussed, there is no loan to be discussed.”
