The Zimbabwean government recently signed an agreement to pay 4,500 white farmers US$3.5 billion for infrastructure improvements on the land expropriated by the government during the chaotic land reform programme of 1997/8.
The initiative shows commitment to constitutionalism and respect for property rights and restoring the rule of law. The agreement is also a noble attempt at bringing closure to a questionable episode of the country’s land history.
But the proposal to fund the exercise by issuing a sovereign bond is highly ambitious. With an ailing economy, the country simply doesn’t have the resources to meet its commitment to white farmers. In his letter dated 2 April 2020 to the heads of the International Monetary Fund (IMF), World Bank, African Development Bank (AfDB), Paris Club and European Investment Bank, Finance Minister Mthuli Ncube clearly outlined that the country does not have the medical and financial resources to fight the COVID-19 pandemic. Although the government cleared its US$107.9 million arrears with the IMF in 2016, it is still struggling to settle its US$2.2 billion debt to other international financial institutions, including the World Bank and African Development Bank.
The government has proposed issuing a long-term sovereign bond, a process where the government sells bonds to investors on either domestic or international financial markets to raise funds. This year, only Ghana, Gabon and Egypt have managed to do so.
It has also called on international donors to help it raise the needed funding. If these options do not raise sufficient funds, another proposal is to sell municipal land around the nation’s biggest cities.
In my view issuing a sovereign bond would be ill-advised. The main reasons for this are that the economic and political conditions are not conducive to an issuance of such a bond. For a country to successfully issue a sovereign bond, it needs some basics in place. It needs an international sovereign credit rating, stable domestic economic fundamentals and investor confidence. None of these are currently present in Zimbabwe.
Why it’s a bad idea
Most of the factors relate to internal political and economic fundamentals.
Firstly, Zimbabwe does not have a sovereign credit rating from the three international credit rating agencies – Fitch, Moody’s or Standard & Poor’s. Without a rating, it is impossible to successfully issue a sovereign bond on international markets because it’s a key input in determining yield and coupon payment on a bond. The government has not yet solicited a rating from the big three rating agencies. It is among the 23 African countries that are yet to request an international sovereign rating.
Secondly, the country has no domestic debt market. If it did, it could try to mobilise local investors who understand the associated risk exposures and could perform their own due diligence. Domestic institutional investors would have to subscribe for the government’s bond issuance to be successful.
Thirdly, the country has changed its currency more than 10 times since 2000. In 2019, the Central Bank banned the use of foreign currency for trading and reintroduced the Zimbabwe dollar quasi-currency that had been abandoned in 2009. The local currency depreciated by more than 320% in less than a year. This eroded savings and pensions, and saw a further loss of confidence in the entire financial system. Strength of a country’s currency determines the attractiveness of its bond issues. A weak currency compounds the risk of default and debt sustainability as repayments will still have to be made in foreign currency.
Fourthly, the increasing economic crisis in the country has eroded the goodwill that the current government accrued post-Mugabe era. President Emmerson Mnangagwa’s actions have failed to tally with his “open for business” mantra. His trips to Davos have failed to yield any significant foreign direct investment as investors question his credibility.
Fifth, the government has been hostile to the private sector. It ordered the closure of the stock exchange on 29 June 2020 and accused businesses of fuelling currency devaluation. State security agencies attempted to stop certain business operations of Econet and Old Mutual, the two largest companies listed on the stock exchange. They were accused of fuelling hostilities against the government. It is these companies and their multinational networks that would support the bond issuance by purchasing the government bonds.
Sixth, the government’s brand has been damaged by a number of government officials being targeted for sanctions. Some are calling for stronger sanctions for human rights abuses. Investors perceive a country that does not respect its rule of law as unlikely to respect its sovereign bond covenants nor honour its obligations on time.
In addition, the government’s commitment to transparency and integrity has been called into question on the back of accusations of mass corruption. Despite promises, there has been little to no action against government officials embroiled in corruption scandals.
Seventh, Zimbabwe’s economy has failed to pick up in the post-Mugabe era. Instead, it has become worse. Food production is at its all time low, the health sector has been paralysed by constant protests and inflation has been estimated at more than 800%.
The last internal factor to consider is that the country’s central bank can no longer perform its functions as the lender of last resort and facilitating cross-border transactions, because of the lack of foreign exchange reserves. Forex access has been restricted to government agencies, departments and selected individuals. Local banks technically have the liberty to make their own forex transaction arrangements with other international corresponding banks.
There are also some external factors that make raising capital this way a bad idea right now. The international debt market has been depressed as a result of COVID-19 and is likely to remain so for the next two years as investors wait to see how countries emerge from the crisis. And the cost of issuing a bond has doubled, which has priced most African countries out of the market. Zimbabwe is no exception.
All these factors are not favourable for Zimbabwe to issue a sovereign bond.
Zimbabwe has many pressing issues. Given that the economy is at its lowest, compensating farmers is a luxury the country cannot afford. It will not yield the implied results of increasing foreign direct investment.
Instead, Zimbabwe should focus on demonstrating the political will to restore business confidence. Evidence of this will include the removal from public office and prosecution of people involved in corruption.
It should also acknowledge the challenges it faces and commit to genuine political dialogue. International partners and investors interpret the denial of the challenges faced by the country as being dishonest and untrustworthy.
Lastly, the government should implement the economic reforms previously agreed with multilateral lenders. Under the agreement, policies should focus on eliminating the government’s double-digit fiscal deficit and adopting reforms to allow market forces to drive the functioning of foreign exchange and other financial markets. These will help stabilise the currency and monetary policy. Without fully implementing these reforms agreed with multilateral agencies, mobilising foreign direct investment will remain a dream.
Zimbabwe’s ruling party said it will expel Old Mutual Ltd. from its financial system, sowing confusion over the status of the insurance giant in the country and what will happen next in the government’s battle to fix its chaotic currency system.
The highest decision-making body of the Zimbabwe African National Union-Patriotic Front on Friday said it endorsed a decision to “eject Old Mutual from the financial system” and to shut down the country’s biggest mobile-money platform, Ecocash. The institutions have caused “runaway inflation through illegal parallel exchange-market rates,” the party’s acting spokesman, Patrick Chinamasa, said after the meeting in Harare.
The government wants to stop companies from using differences in the 175-year-old insurer’s share prices in London, Johannesburg and Harare to determine a potential forward rate for the currency. Measures that were being considered included suspending Old Mutual’s shares from the local bourse, having the securities traded in dollars, or moving it to a planned foreign-exchange based market, people familiar with the matter said earlier this month.
“When they say it is ejected, I’m not sure what he means,” said Lloyd Mlotshwa, the head of equities at Harare-based IH Securities. “I’m not sure it’s a delisting yet, at this point it’s a confusing statement.”
Chinamasa didn’t give further details or respond to calls and text messages from Bloomberg seeking comment.
The local stock exchange has been shut for two weeks after security forces forced the government to cease trading and halt most mobile-money transactions, people familiar with the matter said last month. Clive Mphambela, a Treasury spokesman, declined to comment. A spokesperson for Old Mutual in Johannesburg didn’t respond to calls and a text message seeking comment. Nick Mangwana, a government spokesman, didn’t immediately reply to a text message.
A perennial shortage of cash means anyone who has banknotes is able to negotiate exchange rates with brokers who pay the funds onto mobile-money platforms. The brokers can then sell the hard cash at an even higher rate. The Old Mutual Implied Rate values the Zimbabwean dollar at 122 against the greenback, compared with a black-market rate of about 100, and Friday’s closing price of 65.8765. The government in June abandoned a peg of 25:1 that was put in place in March.
Justin Bgoni, the chief executive officer of the stock exchange, said he is aware of the comments from the ruling party, but wasn’t sure what it implied and would rather wait for official communication from authorities before commenting.
Sean Gammon, managing director of Harare-based Imara Edwards Securities Pvt Ltd. said the comments by Zanu-PF were probably directed at delisting Old Mutual rather than its removal from the entire financial services sector. Old Mutual spans banking, property and insurance in the country.
The last communication received from authorities was that inspections would be conducted into stockbroker trades in the coming days, he said. Once concluded, trading should resume.
Private hospitals in Zimbabwe are charging massive amounts of money - in foreign currency - for Covid-19 treatment.
With government hospitals ill-equipped, and with doctors and nurses on strike, the only hope available for those needing treatment is private care - something beyond the reach of many.
“Kindly be advised that all Covid patients are required to pay USD (American dollars) deposits, $60 (R1,080) for casualty, $3,000 (R54,000) for General Ward and $5,000 (R90,000) for ICU (Intensive Care) hospitalisation,” Obedience Ncube, credit controller for the Catholic run Mata Dei Hospital in Bulawayo, said in a statement.
A government worker earns the equivalent of US$30 (R540), which is about half the fee for a basic Covid-19 test at a private hospital.
Nurses this week said “no USD salaries, no work” as they vowed to stay away.
“The salaries we are currently earning are meagre. They amount to slave wages ... to those who have been subsidising our employer by going to work, mostly because you have an alternative source of income, we call upon you to reconsider this and withdraw your labour as well,” the Zimbabwe Nurses' Association (Zina) said.
The situation has been made worse with the skeleton staff at public health-care facilities testing positive for Covid-19, thereby being sent home for quarantine. Sixty-eight nurses (student and managers) tested positive in one day at the United Bulawayo Hospitals and they have since been sent home. They were tested after one patient died of the disease.
The government this month began hiring newly graduated nurses but some of them don’t want to report to work.
“I was assigned to a Covid-19 centre. I won’t go because my contract stipulates that I have three months to report for duty. This is like being deployed to the war front after training and above all there’s no money,” said a male nurse.
In Harare, The Avenues Clinic said it has put in place “elective admissions” whereby “emergency cases should have at least an RTD (resistance temperature detector) done”.
The hospital also said all admissions should provide proof of a Covid-19 negative test.
To date, Zimbabwe has recorded 605 confirmed cases, 166 recoveries and seven deaths out of 68,400 tests.
Zimbabwe’s state-run Sunday mail reported that Zimbabwe has sufficient foreign currency reserves to sustain the reintroduced foreign currency auction system, citing the Central Bank Governor, John Mangudya.
According to the governor, local lenders have almost $1 billion in their Foreign Currency Accounts (FCA).
“It’s about sufficient resources utilization of resources,” Mangudya was quoted as saying in the Harare-based newspaper.
“The first thing is that we do not expect the exchange rate to continue to go up because there is now a formal market of foreign exchange,” he said.
Zimbabwe reintroduced the foreign currency system on June 23, the first time in 16 years, in a bid to curb the local currency rout that was introduced a year ago.
“Just to put things into perspective, the interbank sysytem which we tried earlier in the year failed because the banks could not trade among themselves due to counter party limits, as well as issue of de-risking,” he said.
“The exchange rate will be driven by effective demand from corporates,” he said.
He added that he expects “the exchange rate to stabilize at a level which allows users of foreign exchange to price their goods and services appropriately while at the same time providing good value for money for exporters.”
Every month, Zimbabwe exports $350 million to $400 million and receives $50 million to $60 million as remittances from abroad.
Crackdown on dissent is on the rise in Zimbabwe even as the country is under COVID-19 lockdown. The nation is recording a spate of abductions and torture common under late former leader, Robert Mugabe.
Three opposition activists from the Movement for Democratic Change-Alliance (MDC-Alliance) disappeared in May after being detained by police while on their way to an anti-government protest.
The women were found badly injured outside the capital Harare nearly 48 hours later and immediately hospitalized. They say they were abducted, sexually abused and forced to drink their urine.
Their abusers remain unidentified but as the women were abducted from police custody, it is assumed they were some kind of state agent.
The three women, member of parliament Joanna Mamombe, Cecilia Chimbiri and Netsai Marova, have since been arrested on charges of lying about their abduction and torture.
'Pattern of disappearances and torture'
Their rearrest came as the United Nations expressed its concerns over what it calls a "reported pattern of disappearances and torture that appear aimed at suppressing protests and dissent" in Zimbabwe.
According to the UN, 49 cases of abductions and torture were reported in the country in 2019 alone.
Thirty-eight-year old rights activist Tatenda Mombeyarara, who was taken from his home by heavily armed men in August 2019, is one of these.
After being severely beaten with metal rods, Mombeyarara was dumped in a quarry. At hospital, it was found he had a broken leg and bruised ribs.
During the beatings, Mombeyarara's attackers accused him of being involved in organizing protests.
Mombeyarara also faces charges of subversion from a previous arrest dating back to May 2019.
'Petrified and terrified'
The May abduction and torture of the three opposition activists has made him even more fearful.
"I am petrified and terrified. It is a difficult situation to become a villain when you are the victim," Mombeyarara told DW. "You are forced to decide to keep to yourself to prevent further victimization. You have to remain gagged to heal. The nature of harm caused on you goes beyond physical."
Zimbabwe under President Emmerson Mnangagwa (center) is still intolerant of basic rights, peaceful dissent and free expression, says Human Rights Watch
The identity of Mombeyarara's attackers is also unknown. But human rights organizations say in most incidences, the pattern of the violations points towards the state being the primary perpetrator of the abuses.
Zimbabwe's government, however, has denied any responsibility.
"Government does not engage or permit any of its agencies and institutions to use any methods such as torture, forced disappearances or abductions," Zimbabwe's home affairs minister Kazembe Kazembe said at a press conference last week.
He accused the opposition of working with foreign organizations to destabilize the government of President Emmerson Mnangagwa.
"Torture and forced disappearances are alien to us," Kazembe said. "We believe they have been brought from foreign environments to generate negative sentiments against our government."
There is increasing tension between Mnangagwa's government and citizens as a result of the poor state of the economy.
The cost of living has gone up dramatically from the beginning of the year especially under the COVID-19 lockdown. Inflation is now pegged at over 700% and long winding fuel queues are an almost permanent feature in the country's towns and cities.
Zimbabweans have been calling on the government to address the situation, but it appears as if the state is instead responding by silencing critical voices.
Failure to follow up
Zimbabwe has also been accused of failing to investigate and persecute the disappearances.
"Zimbabwe's failure to decisively deal with cases of abductions disappearances and torture severely undermines the standing of the country within the international community," said Human Rights Watch Southern Africa Director Dewa Mavhinga.
In early 2000, rights violations resulted in the sanctioning of political leaders in Zimbabwe, then ruled by Robert Mugabe.
The atrocities also led to the isolation of the southern African country from the international community.
Analysts say promises that were made in 2017 when Mugabe was removed from power have become empty. Hope was raised but it was naive because the systems used by Mugabe remained intact.
"The country need to end impunity if Zimbabwe is to be respected. Failure to do so undermines the country's reengagement efforts with the international community," Dewa Mavhinga told DW.
Credit: Deutsche Welle
Zimbabwe’s governing party, Zanu-PF, has summoned finance minister Mthuli Ncube and Reserve Bank of Zimbabwe governor John Mangudya to explain the country’s economic meltdown, the Zimbabwe Independent reported.
Members of the party’s most-senior decision-making body are concerned that the economy’s collapse — marked by inflation of 766% and a currency collapse — threaten the party’s popularity and could cost it the 2023 elections, the Harare-based newspaper reported.
The two officials told the party’s leaders at a closed-door session of the politburo that there is little they can do unless the government comes up with an economic-recovery strategy, the newspaper said. Patrick Chinamasa, Zanu-PF’s secretary for finance and acting spokesman for the party, wasn’t immediately able to comment on the Zimbabwe Independent story when contacted on Friday.
President Emmerson Mnangagwa has blamed the economy’s woes on the private sector. He told the same meeting of the politburo that the country’s currency, reintroduced last year, was under attack, Zimbabwe Independent said.
The Zimbabwe dollar is trading at 90 per US dollar on the black market, according to marketwatch.co.zw, nearly four times above the official peg of 25.
Zimbabwe’s central bank is limiting the number of internal bank transfers customers can make to two a day, as the central bank moves to curb trading in the parallel currency market.
Some “entities” were using their accounts to purchase foreign currency using a network of buyers, the Harare-based central bank said in a letter dated June 4 and seen by Bloomberg.
“These illicit transactions manifest in the form of daily, multiple payments from one account to beneficiaries who hold accounts in the same bank,” the central bank’s financial intelligence unit said in the letter.
The new measure follows a limit imposed last month by the central bank on the amount that banks may transfer via a payment platform with 2 million users. Companies that need to make more than two internal bank transfers a day will need to obtain approval from the lender’s management, it said. Central bank Governor John Mangudya was in a meeting and unavailable when sought for comment.
The Zimbabwean dollar trades at about 76 to the U.S dollar on the parallel market, while authorities have pegged the exchange rate at 25 to the greenback.
Foreign Currency Account holders with Zimbabwean banks – among them units of Standard Bank, Standard Chartered and Nedbank – have expressed apprehension about what they fear could be a run on their funds by the government, as the central bank kicks in new monetary measures.
Foreign currency availability has been a problem in Zimbabwe, whose productive sectors continue to encounter headwinds against a huge import bill for fuel, medicines and raw materials for industry. This has worsened in recent weeks, as FCA account holders have started to face challenges withdrawing hard cash from their accounts.
Chiedza Madzima, the head of operational risk for Fitch Solutions, said Zimbabwe’s foreign currency accounts were facing pressure as depositors rushed to withdraw US dollar funds “amid much lower market confidence.”
FCA account holders with Zimbabwean banks say they have in some cases been turned away by their bank branches, with varying explanations.
Standard Chartered Zimbabwe last month told local media that “the Covid-19 induced lockdown has resulted in some constraints in cash importation”, while some bank chiefs say they have been asked by the central bank to prioritise foreign currency allocations.
However, depositors with various banks have reported bottlenecks in withdrawing cash from FCAs. Zimbabwean authorities have previously said FCA accounts will not be raided, but some depositors are nonetheless expressing concerns.
“The branch manager said I could not get cash because my account was funded through an FCA transfer from another bank. They are prioritising those accounts which have cash deposits, and now I am stuck because I cannot access my funds and at the same time I cannot convert into local currency at the official rate, which is much lower,” said an FCA account holder at foreign-owned bank in Harare.
Funds in FCA accounts have to be utilised within 30 days, according to a new directive by the Reserve Bank of Zimbabwe. Governor John Mangudya this week said the central bank resolved to “re-instate with effect from 1 July 2020 the 30 day-limit of liquidating surplus foreign exchange receipts from exports in order to ensure that more foreign exchange is released” on to the market.
Banks such as Stanbic Zimbabwe and Standard Chartered have been touting alternatives to cash withdrawals such as internal transfers, online and mobile application payments for FCA accounts.
A branch manager with a local bank told Fin24 on Wednesday: “We are having challenges meeting demand for cash for FCAs. There is a lot of pressure we are facing and sometimes we are left with no option other than to lower withdrawal limits for US dollar accounts.”
The current fixed exchange rate of 1:25 for the Zimbabwe dollar versus US dollar is at odds with parallel market rates of 1:70.
Zimbabwean economist Vince Musewe said Zimbabwe’s key export commodities such as minerals and tobacco “will not deliver sustained growth or adequate US dollars” for Zimbabwe while United States-based economics expert, Steve Hanke, tweeted last night that “the connected few profit off access to the official, artificial, cheap” US dollar rate.
Zimbabwe's Health Ministry has announced that all local and foreign investors venturing into the production of cannabis will be offered 100% ownership of their farms and licences to improve competitiveness.
In 2018, the Zimbabwean government approved the production of cannabis for medicinal purposes.
Last year, it announced that 37 local and private investors had shown interest in cannabis farming.
In a letter addressed to cannabis licencees by Health Minister Obadiah Moyo, the offer is with immediate effect.
"Following Cabinet decision and high-level meeting, a policy change enabling investors to hold 100% ownership of Medicinal Cannabis licences was made in order to improve the competitiveness of the sector both regionally and globally," Moyo said.
"At the same meeting, it was also agreed that investors had the option to utilise private land for cannabis project.
"In order to regularise the policy changes a draft Investment Stabilisation agreement is being reviewed by the Attorney General's office. The finalisation has been delayed somewhat due to the focus in controlling the global Covid-19 pandemic."
One company, Alternative Health Oils (AHO), a joint venture between the government and a private firm has seen the State ceding its 40% to the former.
Government directors seconded to AHO board have also been ordered to resign with immediate effect leaving the private firm in total control of the entity.
"Having noted the need for pragmatism in this matter, Alternative Health Oils (AHO), a government company which is being administratively managed by the Ministry of Health and Child Care (MOHCC), will initiate the termination of Joint Venture Agreements, ceding 40% ownership and the resignation of AHO directors from the Special Purpose Vehicles (SPV) with immediate effect.
"On the completion of the processes amendment of the licence would be required."
An Investor for cannabis farming will be issued with a five-year renewal licence.
Previously, production and possession of the drug was illegal and attracted a sentence of up to 12 years.
However, the recreational use or possession of the drug remains illegal.
Source: New Zimbabwe
President Mnangagwa has challenged Africa to pursue the vision of the founding fathers and promote economic integration and sustainable development for the continent.
In his address to the nation today to mark the 57th anniversary of the founding of the Organisation for African Unity, now the African Union, on May 25 1963, the President commended Africans for defending the continent's independence.
"As we celebrate Africa Day, we are jubilant that the vision of our founding fathers has been by and large realised, kept and is jealously defended," he said.
"Above all, that vision continues to be elaborated upon, notably through Agenda 2063 which envisions an economically integrated continent of Africa which will be a global powerhouse by 2063.
"Our continent's desire is to achieve sustainable development, through concrete manifestations of the Pan-African drive for unity, self-determination, freedom, progress and collective prosperity."
President Mnangagwa said the African Continental Free Trade Area that seeks to create a prosperous future was now in force and called for the scaling up of integration and cooperation at all levels. He said cooperation was imperative in the continent's quest to achieve food security and to mitigate the impact of climate change and threats posed by disease outbreaks.
"Conscious of Agenda 2063, we must continue to explore and exploit our vast natural resources. The value addition and beneficiation of our various resource endowments must be harnessed to modernise and industrialise Africa's economies.
"In this 'Decade of Action', let us give impetus to innovation. We must drive all facets of socio-economic development, leveraging on science, technologies as well as our rich heritage, history and cultures," said the President.
The promotion of human development and the economic empowerment of youth and women must result in an Africa that produces goods and services for itself through its own innovations and initiatives.
"The realisation of sustainable development and the great vision of an improved standard of living for our people must remain a top priority."
President Mnangagwa called on Africans to deepen the culture of democracy and good governance as taught by the continent's founding fathers. Former colonial powers had no authority to lecture Africa on democracy as the continent had fought to achieve the democracy being enjoyed to this day. Africans should not be shy to express the rich cultural heritage, languages and identities.
"Zimbabwe continues to pursue robust cooperation with our neighbours and the continent as a whole; subscribing to a fully integrated continent of Africa. We must now urgently consolidate the implementation of cross-border projects, to improve our road networks, water, energy and ICT infrastructure, among others. This will inevitably accelerate multi-faceted sustainable development in the region and on the continent," he said.
The continent continued to face various challenges despite development made in other areas with civil wars and terrorism being experienced in some areas. He said the Extraordinary SADC Organ Troika Summit recently met to address the terrorism scourge experienced in some parts of Mozambique.
"Let me reiterate our unequivocal rejection of terrorism, in all its forms and manifestations, and our strong condemnation of all terrorist acts, which will never be justified.
"Zimbabwe remains committed to play its part in all regional and continental initiatives as our modest contribution towards a prosperous and peaceful world order," he said.
President Mnangagwa condemned some Western nations for meddling in the internal affairs of countries on the continent. Zimbabwe continued to suffer from unwarranted interference and endure illegal sanctions imposed as punishment for reclaiming land.
"However, we are buoyed by the fact that we have re-united with our land, which is now irreversibly reposed into our hands, we its true owners," he said.
"As we commemorate and celebrate the unity of our continent, we in Zimbabwe deeply thank our Sadc region and the whole continent of Africa for standing with us. Africa has rejected and denounced the sanctions against Zimbabwe and the Sudan, urging those responsible for these illegal, heinous measures to immediately lift them without conditionalities.
"They are illegal, unjust, spiteful and undeserved. Above all, they go against the grain and spirit of civilised international relations as espoused in the United Nations Charter. We reiterate that sanctions have no place in modern international relations."
President Mnangagwa also urged Africans to remain alert to the threats of Covid-19 pandemic despite the continent recording low infection and mortality figures as compared to other continents.
"We must therefore, continue with the concerted efforts towards a continental response, and a united global response under the World Health Organisation. Covid-19 knows no borders; hence our response both on the continent and beyond must reflect this undeniable reality," he said.
The President urged Africans to re-dedicate themselves to defend the continent's liberty and unity and commit to fight for lasting justice and sustainable development, which leaves no one behind.
Source - The Herald Zimbabwe