HomeLocal NewsBusiness frets over sanctionsl...About US$40bn lost in past decade...Banks most hit, many...

Business frets over sanctionsl…About US$40bn lost in past decade…Banks most hit, many cut links with Zim


LEADING industrialists this week joined a growing list of Zimbabweans pushing for the lifting of sanctions slapped on Harare about two decades ago, saying conducting international trade and accessing finance on capital markets was curtailed by the embargoes.

The United States, European Union (EU) and Britain imposed sanctions against Zimbabwe in early 2000s.

Western powers punished Harare over alleged human rights abuses, but the Zimbabwe government argues it was over the land reform programme.

Dozens of key state companies have been slapped with sanctions and these include Zimphos, a firm which provides critical raw materials for fertiliser production and water treatment chemicals.

The impact of the sanctions has been felt in firms like the Small and Medium Enterprises Development Corporation, the state-run Agribank, the Minerals Marketing Corporation of Zimbabwe and the Industrial Development Corporation.

Zimbabwe National Chamber of Commerce (ZNCC) president Tinashe Manzungu said the international embargo has negatively affected economic growth for 21 years.

The sanctions, he said, have seen Zimbabwean companies struggling to access crucial funding from the global financial system.

As a result, the southern African country has battled to forestall high level capital flight.

Correspondent banks, which link domestic lender to the global financial system, have withdrawn at a massive scale after several others have been slapped with big fines for dealing with Zimbabwe, he said.

“Banks have lost a fortune through correspondent banking relationships making it expensive for US dollar-denominated cross-border transactions,” Manzungu told the Zimbabwe Independent.

“An estimated US$40 billion has been lost because of sanctions in the past decade. Every sector has been affected either directly or indirectly. There are many factors that have affected industry, including the Covid-19. But embracing the African Continental Free Trade Area is critical in minimising the adverse effects of the sanctions.”

Ex-Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe said sanctions were hurting business.

“The CZI took a position that sanctions must go,” Jabangwe said. “Some of our members had funds withheld such as loans or inward payments, investors have chosen to bypass Zimbabwe as it’s not easy for them to separate targeted persons and their businesses. Standard Chartered Bank was hit by penalties by the US.”

The US-imposed sanctions have forced international investors to avoid setting up businesses in Zimbabwe, which today receives only one-tenth of about US$6 billion in annual investment flowing into its regional peers.

The crisis has been compounded by the fact that accessing critical raw materials from other countries is often hindered.

“We are left with less than five corresponding bank facilities as a country, which makes it harder and more expensive to make international payments,” Jabangwe said.

“The fact that there are sanctions by America makes other international partners to just exclude doing business with Zimbabwe. Local companies are not able to access funding from the International Finance Corporation, which is instrumental in industrial development.

“No meaningful projects have happened under United Nations agency such as UNIDA as donors do not sponsor programmes. Zimbabwe has been excluded from a lot developmental programmes. You find programmes accommodate all southern African countries except Zimbabwe. When you contact those running such programmes they just say we are not yet extending to Zimbabwe but in future we will,” he said.

The US enacted the Zimbabwe Democracy and Economic Recovery Act (Zidera) of 2001.

This law has caused business to have a torrid time transacting offshore with a lot of correspondent banks cutting ties with Zimbabwe. It has also made it difficult to receive or make international payments for exports.

Essentially, firms around the globe cannot trade freely with sanctioned companies for fear of reprisals.

The Affirmative Action Group(AAG) president Mike Chimombe said sanctions continue to bite as many indigenous companies have been forced to close or reduce their workforce.

” Seeing that most of the local companies were facing a myriad of challenges, many skilled Zimbabweans left the country in search for greener pastures. This brain drain is making it difficult to revive the Zimbabwean economy.So in a nutshell, the high cost of borrowing, tight liquidity conditions, outdated technology, decline agricultural output, poor export performance and serious power challenges can all be attributed to the illegal Sanctions, “he said.

He said  lack of offshore lending has crippled the operations of many indigenous companies as Zimbabwean importers are asked to pay cash upfront thereby squeezing their foreign currency reserves.

“To make matters worse, some of the local and international financial institutions have been slapped with fines by some of the countries that imposed the illegal sanctions on Zimbabwe for trying to help Zimbabwean companies. Due to these negative factors, access to credit markets have been blocked and indigenous companies have to live from hand-to-mouth, ” Chimombe said

The US Treasury Office of Foreign Assets Control (Ofac) fined a Zimbabwean commercial bank US$2,48 million for “flouting sanctions provisions spelt out under Zidera”.

Another commercial bank was slapped with a staggering US$3,8 billion fine for facilitating transactions on behalf of a bank which was then a specified institution under Zidera. However, the penalty was later reduced to US$385 million.

Meanwhile, the United Nations Special Rapporteur on unilateral coercive measures, Alena Douhan, this week called for the lifting of the sanctions against Zimbabwe. She called for dialogue among key stakeholders.

Douhan said this in a statement released Wednesday at the conclusion of her 10-day visit to Zimbabwe to assess the impact of the sanctions.

“The US and other states should lift their sanctions on targeted individuals and entities and end over-compliance,” Douhan said. “The time is ripe for sanctioning states and key national stakeholders to engage in a meaningful structured dialogue on political reform, human rights and the rule of law, and abandon rhetoric on sanctions as an advocacy tool.

“This situation also limits Zimbabwe’s ability to guarantee the functioning of public institutions, delivery of services and maintenance of essential infrastructure and undermines the right to development of the Zimbabwean people and impedes the achievement of the sustainable development goals.”

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