The Sunday Mail
SANCTIONS, which were imposed by the United States of America, Britain and the European Union (UN) as punishment for the land reform programme at the turn of the millennium, have been an albatross around the country’s neck for the past two decades.
The land reform, however, has been remarkably successful, particularly in the lucrative tobacco and horticultural sectors, as it has economically empowered more than 400 000 families, including prominent members of the opposition. But measures by the US Treasury Department’s Office for Foreign Assets Control to intercept payments either from individuals and companies have been unnecessarily encumbering. The risk premium of investing in Zimbabwe was elevated as it was considered a high-risk destination. Support from international financial institutions also dried up.
Although the country has been fighting for the illegal embargo to be lifted for the best part of two decades, African countries, especially SADC member states, in a show of unity reminiscent of the Organisation of African Unity (OAU) days, are beginning to close ranks.
The 39th SADC Summit of Heads of State and Government held in Dar es Salaam, Tanzania, last year declared October 25 as Anti-Sanctions Day. It is believed that this could provide the much-needed traction and muscle for the anti-sanctions lobby.
Last week, captains of industry spoke of the economic carnage they have suffered and some strategies they employed to keep their heads above water during the past 20 years.
Sanctions have naturally prevented local firms from accessing offshore loans and have stifled exports, including blocking foreign direct investment (FDI). Local banks such as ZB and CBZ were at one time affected by OFAC activities. The impact has been staggering.
The Ministry of Foreign Affairs and International Trade recently said during the pre-sanctions era, loan inflows to Zimbabwean companies increased from US$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. As a perceived high-risk destination, the country has been a target for de-risking interventions by correspondent banks in the US, Europe and other jurisdictions.
In the same year, OFAC fined Barclays Bank US$2,5 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.
In 2017, CBZ was also slapped with a US$3,8 billion fine for reportedly facilitating transactions on behalf of ZB Bank, which was sanctioned through ZIDERA (Zimbabwe Democracy and Economic Recovery Act). Although the fine has been suspended, the bank remains under OFAC surveillance.
Similarly, Standard Chartered Bank received a US$1,1 billion fine for facilitating transactions in many countries, including Zimbabwe, where the exposure was only US$18 million.
These banks including Agribank and Infrastructure Development Bank of Zimbabwe (IDBZ) were in the US crosshairs.
In particular, Agribank lost a line of credit worth more than US$98 million and struggled to attract an equity partner.
Even the Small and Medium Enterprises Development Corporation had its US$3 million blocked by OFAC. In addition, the Industrial Development Corporation lost over US$20 million, while its fertiliser subsidiary company still has its US$5 million frozen. The Minerals Marketing Corporation of Zimbabwe, a State-owned company responsible for marketing the country’s minerals, lost over US$30 million.
ZANU PF’s research department argues the country lost over US$42 billion worth of potential investment from the time the sanctions were imposed. Captains of industry believe sanctions have to be removed as they have destroyed businesses and people’s livelihoods.
Adjusting to operating under the embargo has come at a cost. Confederation of Zimbabwe Industries (CZI) immediate past president and James North proprietor Mr Sifelani Jabangwe said sanctions were not targeted.
“So some top-quality investors do not come to partner local companies. Access to markets and financing is also affected. Zimbabwe is now only left with reduced correspondent banking relationships as other international banks have de-risked and cut relationships with the country,” he said.
Schweppes Zimbabwe managing director and CZI former president, Mr Charles Msipa, said sanctions actually have a “chilling effect” to global investors as capital “is a coward”.
“The moment Zimbabwe was placed on sanctions, many American companies and others that feared America left the country. Exporting to some parts of world has been difficult as some companies were refusing to distribute our products for fear of being penalised. We had cases of transporters who were even refusing to carry our products,” he said.
Economist and entrepreneur, Mr Langton Mabhanga, said local companies, including small and medium enterprises (SMEs), were only surviving because of sheer resilience.
TelOne chief executive officer Mrs Chipo Mtasa said the telecoms business was the most affected as it depended heavily on technology from some of the countries that imposed sanctions on Zimbabwe.
“The negative credit rating seriously affected our business as we are unable to engage some vendors. We depended on a few vendors and eventually we become price-takers instead of negotiators. Because of the strategic position we occupy, Government assisted us to import equipment. We survived because of our initiatives such as aggressive marketing to individuals and corporates. Technology business is all about partnerships and we want to thank the Government for creating an enabling environment that helped up to get technology from Huawei of China,” she said.