A Zimbabwean businessman, Joseph Mutizwa has submitted a testimony articulating perspectives of Zimbabwe’s private sector to the United States Senate Foreign Relations Sub-Committee on Africa and Global Health Policy stating that economic sanctions as a major category of hurdles that face the Government of Zimbabwe as it embarks upon economic reforms.
The businessman, who also sits on board of various companies, including Delta, submitted a hearing on Zimbabwe After The Elections yesterday.
“In Zimbabwe, trade sanctions impact negatively on economic growth through denying the country access to foreign lines of credit, which ordinarily finance external trade and access to markets, particularly the USA market, through exclusion from AGOA,” Mutizwa says. “. Furthermore, the country’s export competitiveness is adversely affected by negative perceptions of the country resulting in high country risk profile translating into higher country risk premiums.”
AGOA (African Growth and Opportunity Act) was enacted on 18 May 2000 allow free trade between US and other African countries.
“Due to the above, the private sector in Zimbabwe finds it very difficult to access affordable external financing to retool and modernize plant and equipment and access technology.”
The businessman, who sits in the Reserve Bank of Zimbabwe board, also says the Zimbabwe Democracy and Economic Recovery Act (ZIDERA) has proved to be a great obstacle for Zimbabwe to access foreign finance.
“USA financial institutions are not at liberty to provide well-structured financial support against Zimbabwe’s minerals (gold, platinum, cobalt, lithium, etc.,) due to OFAC compliance rules,” Mutizwa says. The same is for banks in Europe due to compliance, reputation and association risks.
“As a result of the impact of ZIDERA on the financial sector, the Zimbabwe banks have lost more than 100 corresponding banking relationships over the past 10years.”
“The strong view of the private sector in Zimbabwe is that the imposition of sanctions on Zimbabwe by the US and the EU have branded Zimbabwe and its entire financial linkages with the rest of the world as representing high risk thereby making the country a compelling target for de-risking interventions by leading correspondent banks in the USA and Europe,” Mutizwa goes on.
The testimony from the Zimbabwean businessman says if Zimbabwe fails to secure USA and EU financial support, it would be reasonable to assume that the Southern African country will consider making a strong attempt to access the Chinese US$60 billion investment for Africa even if it entails mortgaging substantial share of its natural resources to achieve this.
The country is also likely to develop stronger economic ties with Russia and Eastern European countries such as Berulas should USA and EU fail to support Zimbabwe according to the Testimony to the American Senate.
Zimbabwe is also likely to embrace investors of questionable credentials when the much-needed assistance is not offered.
“It is not inconceivable that if the present government fails to secure support from the international financial institutions despite its commitment to reform it may, in frustration, revert to populism catastrophic consequences for a country with so much promise,” Mutizwa says.