Zimbabwe and the European Union began political talks aimed at turning the page on hostile relations during Robert Mugabe’s rule, a step that could enable a resumption of direct financial aid for the ailing economy.
During Mugabe’s four-decade rule until 2017, he would routinely blame European “colonialists” for Zimbabwe’s problems and snarled at EU and US sanctions for rights and vote abuses.
The EU has only kept sanctions on Mugabe, his wife and the state arms manufacturer, but is yet to resume direct funding to the new government of President Emmerson Mnangagwa, preferring to channel money through local charities and UN agencies.
With the economy afflicted by dollar shortages, fuel queues, power-cuts, and soaring prices, Mnangagwa has said restoring ties with the West and multilateral lenders like International Monetary Fund is one of his major priorities.
At the start of the open-ended talks between diplomats and officials in Harare, EU Zimbabwe delegation head Timo Olkkonen said they would discuss issues including economic development, trade, investment, rights, rule of law and good governance.
The government has already signed up to an IMF monitoring programme where it has committed to political and economic reforms in a bid to set a track record of fiscal discipline that could earn it debt forgiveness and future financing.
At a separate event in a Harare hotel, Mnangagwa signed a new bill creating a tripartite negotiating forum intended to bring labour, business and government together to shape policy.
The 76-year-old leader is under pressure to deliver on pre-election promises and wants to avert a repeat of violent protests over a steep fuel price hike in January.
Later on Wednesday, the government is expected to start wage negotiations with public sector unions, who say a pay rise of up to 29% they received in April had already been eroded by inflation, now at a 10-year high of 75.86 %.
Mnangagwa has promised to break with his predecessor and says his “open for business” mantra will woo foreign investors. But critics say under his rule the economy shows no signs of improvement while security forces have continued to crush dissent.
As Zimbabwe’s economy struggles and the country faces scarce fuel supplies, some businesses are refusing to accept the ever-weakening local currency, insisting on doing business in U.S. dollars.
One reason is that the local currency, known as bond notes, are not accepted outside the southern African country, making them useless for any companies that need to import goods.
This spare vehicle parts seller, Tongai Madamombe, says he wants President Emmerson Mnangagwa’s government to switch to the U.S. dollar as pricing in bond-notes has become difficult.
“For those that do not import, charging in bond-notes is not as difficult, as it is for us who import,” Madamombe said. “If you do not calculate well, you will fail to restock. We are really in difficult times. So we are now pricing in U.S. dollars, those who do not have it we use parallel market rates, as we will go there to get foreign currency to import our stock.”
Zimbabwe abandoned its dollar more than a decade ago, when hyperinflation made it worthless. Now the bond notes, introduced two years ago, are also depreciating in value.
The South African rand and British pounds are acceptable in many places, but very hard to find.
Even some Zimbabwe government departments and companies such as the National Railways have started asking for payment in U.S. dollars, partly to protect themselves against the depreciating bond notes.
Fuel is another scarce product in Zimbabwe, and the government continues to control its price. Some companies have resorted to selling it in U.S. dollars only.
Eddington Mazambani, the head of the Zimbabwe Energy Regulatory Authority, says it is only allowing fuel companies that have directly imported fuel on their own to trade in U.S. dollars, as the Reserve Bank of Zimbabwe pays foreign currency for most fuel imports in the country.
“We require documentation, if you have procured through Reserve Bank [and] you then fail to produce documentation to us, we will then take the necessary measures. You would be breaking the law, so we will take measures according to the laws in the petroleum sector,” Mazambani said.
The government says gas stations trading in U.S. dollars when they are supposed to take local currency are being stripped of their licenses. But so far that policy has not made fuel more available or stopped the practice.
Zimbabwe will not borrow externally and will cut reliance on the central bank to finance deficits during an IMF staff-monitored programme in a bid to set a track record of fiscal discipline that could earn it future funding, the IMF said.
The southern African nation owes $8.8 billion to foreign lenders, $2.6 billion of that in arrears to the World Bank, the African Development Bank and the European Investment Bank. It has not accessed financing from international institutions since defaulting on its debt in 1999.
It is also suffering from a dollar crunch, rising inflation and public anger over shortages - all issues that have piled pressure on President Emmerson Mnangagwa who has promised to revive the economy after the fall of Robert Mugabe.
His government agreed to have its economic and political reforms monitored by the IMF from May 15 to March 15 next year to try to convince foreign donors to restructure and forgive its debt.
In a report released on Friday, the IMF said Harare authorities pledged to only borrow RTGS$400 million from the central bank in 2019, down from RTGS$3 billion last year.
The treasury will also cut the government’s salary bill to 67 percent of the budget, down from 79 percent last year and slash the budget deficit to 4% of GDP, in line with earlier projections, the IMF added.
The government will remove grain subsidies next year after the central bank scrapped a subsidy on fuel and ordered oil firms to buy dollars on the open market. Economic growth in the southern African nation is, however, expected to suffer from a severe drought and a cyclone that tore through the eastern regions early this year.
The IMF said this would see the economy contracting by 2.1 % this year before rebounding to 3.3% growth in 2020. The annual inflation rate will average 80.86 percent this year but the figure would fall to 14.1% next year, it added.
“Higher than projected inflation or a continued exchange rate depreciation could increase spending pressures, while failure to enforce (performance finance management) could lead to unbudgeted expenditure,” the IMF report said.
The central bank announced at the weekend that businesses and individuals would start accessing a $500 million loan borrowed from the African Export and Import Bank - a loan that had been negotiated before the IMF programme, the body’s representative in Harare, Patrick Imam, told Reuters.
Zimbabwe hiked fuel prices by around half on Tuesday, the second sharp rise in four months, a day after the central bank effectively removed a subsidy by ending oil importers’ access to U.S. dollars at a favourable rate.
The fuel price rise, likely to push up the country’s soaring inflation rate, was accompanied by a plunge in the country’s RTGS dollar - which posted its biggest one-day fall against the U.S. dollar on the interbank market.
Oil firms started buying dollars on the interbank to import fuel on Tuesday, having previously been allowed to use a 1:1 dollar to RTGS$ rate.
The latest price increase had been expected. It followed a 150% fuel price hike in January, which sparked violent street protests and led to the death of a dozen people after a harsh security crackdown.[nL8N1ZE26M]
The Zimbabwe Energy Regulatory Authority (ZERA) said in a circular that diesel would now cost RTGS$4.89, up from RTGS$3.26, and petrol RTGS$4.97, compared with RTGS$3.38. It had earlier on Tuesday denied plans to increase the price of fuel.
The Reserve Bank had been under pressure to remove the fuel subsidy, with economists saying some fuel companies were accessing cheap foreign currency and selling it on the black market instead of importing fuel.
Traders at three commercial banks said the RTGS$ had weakened to a low of 4.6 against the greenback compared to 3.5 at the opening of trading on Tuesday, its biggest drop in a day since the interbank was launched on Feb. 22.
“We are still in a period of price discovery since the central bank said the exchange rate should reflect the market. It is still a buyers’ market and no sellers are coming in at this rate,” said a trader at a commercial bank in Harare.
On the black market, the RTGS$ was trading at 6 to the dollar, having come off highs of 6.3 last week Friday.
The fuel price hike will likely trigger another round of price increases in a country where the inflation rate reached 75.86% in April, the highest in a decade.
“On one end it is good that the fuel price now reflects the official exchange rate but the downside is that it will impact every cost in the country and put pressure on wages,” Harare-based economist John Robertson said.
The interbank market was meant to encourage businesses and individuals to trade foreign exchange using official channels and improve the flow of dollars.
But this did not happen, with traders accusing the central bank of manipulating the exchange rate, which forced many Zimbabweans to trade for dollars on a thriving black market.
The dollar crunch has led to prices of basic goods soaring. Some businesses charge for their goods in U.S. dollars to cushion themselves against the weakening local currency.
Treasury’s permanent secretary, George Guvamatanga, said the government would subsidize public transport and that the state bus company would charge a maximum of RTGS$1 for local trips to cushion commuters from the effects of the fuel price hikes.
Zimbabwe has started rolling power cuts lasting up to eight hours that will also hit mines, a schedule from the state power utility showed on Monday, after reduced output at both the largest hydro plant and ageing coal-fired generators.
The power cuts will add to mounting public anger against President Emmerson Mnangagwa’s government as Zimbabweans grapple with an economic crisis that has seen shortages of U.S. dollars, fuel, food and medicines as well as soaring inflation that is eroding earnings and savings.
The Zimbabwe Electricity Transmission and Distribution Company (ZETDC) said power cuts, known locally as load shedding, would start on Monday and will last up to eight hours during morning and evening peak periods.
"The power shortfall is being managed through load shedding in order to balance the power supply available and the demand," ZETDC said in a public notice.
Isaac Kwesu, chief executive of Chamber of Mines, which groups Zimbabwe’s biggest mining companies, did not answer his mobile phone when contacted for comment.
Mining accounts for more than three-quarters of Zimbabwe’s export earnings and any power cuts in the sector will affect production and exports.
In the past, some of the big mines, including platinum and gold producers, have resorted to directly importing electricity from neighbouring countries like Mozambique and South Africa.
Zimbabwe last experienced its worst power shortages in 2016 following a devastating drought.
The southern African nation, which is producing 969 MW daily against peak demand of 2,100 MW, is entering its peak winter power demand season, which will increase electricity consumption.
Minister of Energy and Power Development Joram Gumbo was quoted by a local newspaper saying he would travel to Mozambique this week to try to agree an electricity supply deal with that country’s power utility Hydro Cahora Bassa.
Zimbabwe's government has reacted swiftly and ordered bread-makers to reverse a 50% bread price hike that had been effected.
Information, Minister Monica Mutsvangwa told journalists at a post-Cabinet press briefing that government had frowned at the increase that she said suggested a sinister agenda to "dampen the mood of the nation" ahead of independence celebrations.
"The Minister of Industry and Commerce presented to Cabinet a letter by the Bakers Association of Zimbabwe, stating their intention to immediately hike the price of bread without any recourse to consultations with the Government as is the normal procedure," Mutsvangwa said.
Bakers increased the price of a loaf of bread from RTGS$2 to RTGS$3 early Tuesday following a decision by government to increase the price of grains by 70 percent last week.
Cabinet according to Mutsvangwa believed the increase had ulterior motives.
"Of particular concern to Cabinet also is the timing of the planned price increase, which is coming exactly two days before the national Independence celebrations. Such a move, whether by design or otherwise, certainly has the effect of dampening the mood of the nation.
"Furthermore, the unilateral action does not bode well to ongoing efforts by Government to engage in dialogue with all stakeholders, business included, with a view to creating a stable environment where businesses can compete and thrive," the government spokesperson said.
President Emmerson Mnangagwa according to Mutsvangwa remained open to discussions on a possible solution to the crisis.
"It can be recalled that on 29 October 2018, His Excellency President Emmerson Mnangagwa met with business leaders at State House where he stated that Government has an open door policy and stands ready for any engagement and consultations in order to ensure that the economy stabilises.
"As such, unilateral price hikes, particularly on basic commodities that our people cannot do without is not in consonance with the spirit of mutual engagement that Government is encouraging," she said.
Then the order: "Cabinet, therefore, calls on the Bakers Association of Zimbabwe to defer the planned hike in the price of bread in order to allow the normal mutual consultations to take place.
"The consultations are aimed at facilitating a clearer understanding of the issues of concern and to explore solutions thereto."
According to Mutsvangwa government also released 20 million litres of fuel into the market to ease crippling shortages that have seen the continuation of queues.
Source: New Zimbabwe
It is in South Africa's interest to see a thriving and stable Zimbabwe. A collapse of its neighbour's economy would probably see an influx of legal and illegal migrants into South Africa – a situation that could fuel xenophobia and further strain service delivery.
Yet there has been a bewildering contrast between South Africa's messages of solidarity and its inaction where it matters. On the one hand, President Cyril Ramaphosa's government has maintained its support for President Emmerson Mnangagwa's administration. South Africa was the first to congratulate him on his electoral victory in August 2018. This has been followed by spirited calls for the unconditional lifting of sanctions and restrictive measures placed on Zimbabwe nearly two decades ago.
On the other hand, South Africa has come short of providing what Mnangagwa urgently needs: a financial bailout. The just-ended Zimbabwe-South Africa Bi-National Commission session – the third since the inaugural session in 2016 – might have put paid to the many rumours that South Africa would provide Zimbabwe with a much-needed cash injection. Instead, it ended with a joint communiqué that reads more like a political statement of solidarity with little in terms of relief for its cash-strapped neighbour.
Established during the tenure of former presidents Robert Mugabe and Jacob Zuma, the commission has been little more than an annual symbolic gesture of friendship between the two. Ramaphosa's team sent ahead of the Bi-National Commission engaged in robust meetings with key players in the private and public sectors presumably to try to establish how South Africa could help its beleaguered neighbour.
While the decision to not bail Zimbabwe out is probably based on practical economic calculations, the anti-sanctions rhetoric is a different matter. A cursory view of the anti-sanctions call might lead one to the conclusion that lifting sanctions would grant Zimbabwe access to lines of credit from the international market and thereby ameliorate its currency crisis.
However, considerations for South Africa are as much political as they are economic. Sanctions imposed on Zimbabwe by Western countries relate to the blatant human rights abuses of the Mugabe regime. South Africa's anti-sanctions position could also be interpreted as a general stance – shared by the wider Southern African Development Corporation (SADC) region – against sanctions in general.
The ‘sanctions must fall' mantra should be seen as a distraction from the economic mismanagement of the past three decades. Even Mnangagwa has said the ZANU-PF government shouldn't use sanctions as an excuse for the country's economic woes.
So why has South Africa taken up the ‘sanctions must fall' mantra while staying silent on the human rights abuses, killing of protesters and a heavy-handed clampdown on civic space during the January fuel hike protests?
South Africa is wary of being perceived as aligning with the West, especially the United States (US). The US government has been vocal and forthright against the Mnangagwa regime's use of force against protesters to the extent of renewing sanctions for another year.
Offering the Zimbabwe government unqualified support becomes an opportunity for South Africa to demonstrate its international foreign policy independence and to shore up against "invasive" Western neo-colonial tendencies.
At the same time, well aware of the depth of Zimbabwe's economic and currency crises, South Africa knows that giving bilateral aid of $1.2-billion wouldn't necessarily stabilise its neighbour's economy. Without addressing the enduring currency crisis, any bailout would be sucked into an economic black hole just to have Zimbabwe requiring more. The shortage of hard currency only begets more shortages.
The Zimbabwean government needs foreign currency for consumer goods, including for the procurement of fuel and wheat, as well as to service debt, which the finance minister estimates to be around $16bn.
The recently introduced interbank foreign currency trading system has so far not been able to address the foreign currency shortage. The real-time gross settlement (RTGS) dollar continues a steady depreciation against the US dollar from the 1:2.5 at its introduction to 1:3 in six weeks.
Worse, the floating of the RTGS dollar has not engendered confidence in the monetary system. On the black market, the RTGS dollar continues to plummet weekly and inflation is on the rise. Prices of basic commodities such as bread have risen steeply. There is still no guarantee against arbitrage and policy somersaulting from the cornered government.
Further, a bailout would put South Africa in an invidious position. South Africa is itself in the throes of economic stagnation emerging from sluggish growth of 0.8% in 2018. The country's unemployment rate is currently hovering above 25% – one of the highest in the world.
The recent worsening of power cuts only plays into an already volatile domestic situation. Any talk of bailing Zimbabwe out would probably elicit a backlash from the restive population already prone to xenophobic tendencies towards citizens from neighbouring states. The African National Congress can ill afford to antagonise citizens any more in an election year.
Strong parallels can be drawn with the situation in South America where South Africa has been supporting Nicolás Maduro Moros's government in Venezuela against the machinations of the US's Donald Trump administration.
While the matter forming the basis of the Zimbabwe crisis is different from Venezuela, the geopolitical script plays out in the same way. South Africa is choosing the course of solidarity with the "besieged".
As Zimbabwe's economic and political situation continues to teeter on the verge of chaos its southern neighbour seems to be taking a considered approach to the crisis. The dilemma for SA is that without a cash infusion, the economic crisis will worsen, and a worsening economic situation will probably result in more protest and civil unrest. The Mnangagwa administration has already shown itself only too eager to approach protest with force and brutality.
This pushes South Africa further into an unenviable choice between principle, as enshrined in its Constitution, and the realities of geopolitics. It remains to be seen for how long South Africa will give Zimbabwe a palliative response before the wheels come off.
Ringisai Chikohomero is a researcher, Peace Operations and Peace Building Programme, Pretoria
President Emmerson Mnangagwa's government, has begun registering former commercial white farmers who lost their land under the chaotic land redistribution exercise.
In a statement Sunday, the Ministry of Lands said it was identifying and registering former white farm owners who want to participate in the interim advance payments scheme. The scheme according to the statement is targeting those "in distress."
The programme is being coordinated by Commercial Farmers Union (CFU) and the Compensations Steering Committee (CSS) representing former farm owners according to the statement.
"The ad-hoc Compensation Working Group, comprising government officials and the representatives of former farm owners, is currently working towards the compensation and establishing the compensation quantum figure for farm improvements based on an agreed method of valuation," the Ministry headed by former Air Force chief Perrance Shiri said.
The statement added that the latest move reflected government's commitment to settling its side of the bargain.
"Given the significant progress made to-date, it is anticipated that this comprehensive farm improvements valuation will be completed by end of May 2019.
"Reflecting government's commitment to compensate former farm owners, for farm improvements and recognising that a larger number of farmers are still to be compensated government allocated RTGS$53 million in the 2019 National Budget for interim advance payments," said the statement published in the State media.
"These interim advance payments will be made to former farm owners affected by the land reform programme and who are in financial distress."
In a separate statement the CFU said it has developed a form which applicants will complete. The form according to the statement does not jeopardise future claims for full compensation.
"As this is a limited fund, it is hoped that those who are not in financial distress do not take up the offer so as maximise the effect on others not so fortunate," said CFU.
"Whether you take it up or not, does not alter your rights to be compensated in any way, except that what you receive now will be deducted from your final computation."
In his inauguration speech in 2017 President Emmerson Mnangagwa, promised to compensate over 4000 former white farmers whose land was forcibly taken away under the fast track land reform program. While the former farm owners have been demanding full compensation, government has passed a law that provides for payment in respect of developments only.
Credit: New Zimbabwe
The Zimbabwean government has brought back the Chinese to the Chiadzwa diamond fields, three years after former President Robert Mugabe drove them out on allegations of looting.
Chinese-owned Anjin was expelled by government on February 22 2016, along with Mbada Diamonds, on grounds that their special grant licences had expired. Prior to that, Mugabe had accused them of massive leakages and smuggling the gems out of the country. Now under President Emmerson Mnangagwa, Anjin and Russian diamond mining company Alrosa will spearhead the government’s target of raising at least US$400 million in revenue by the end of 2019.
They will form partnerships with the Zimbabwe Consolidated Diamond Company (ZCDC). “Anjin, which used to operate in the area, is now back on the ground. We expect that it will commence production, at the latest, by end of May. We are looking at it being a significant producer in that regard,” said mines and mining development minister Winston Chitando.
The Russians and Chinese – Zimbabwe’s “all weather friends”, key to the Mnangagwa administration – take up the diamond fields after neighbouring Botswana passed on an offer tabled by Harare.
As part of Zimbabwe and Botswana’s bi-national relations, Harare initially tabled an offer that would have seen Botswana give Zimbabwe a US$500 million loan facility – which is a US$100m more than the year-end revenue target. In return, Botswana would mine diamonds from Chiadzwa.
However, Botswana said that due to budgetary constraints, Gaborone would not be able to support the proposed Diamond Backed Loan facility.
Since the diamond find in 2005, it had been expected and targeted that the mineral would revive Zimbabwe’s ailing economy that was under targeted sanctions owing to human rights abuses and disbanding of the rule of law. However, the local community was only left with unfulfilled promises and human rights watch organisations accuse the government of using the diamond revenue to prop up the regime.
(Source, Sunday Times)