Zimbabwe’s payouts to Sakunda ‘risky’
IMF warns payments pushing economy to the brink
The IMF has warned Zimbabwe that state payouts to Sakunda, a company linked to global commodities trader Trafigura, are pushing the shortagesplagued economy to the brink.
The IMF has privately warned Zimbabwe that state payouts to a company linked to global commodities trader Trafigura were pushing the shortages-plagued economy to the brink, reviving fears of corruption at the highest level of government.
Payouts to Sakunda Holdings, a fuel company owned by an ally of President Emmerson Mnangagwa, were in effect met by the central bank printing money.
The transactions severely undermined the country’s currency the Zimbabwe dollar
only months after it was introduced, the Washingtonbased institution told Harare earlier in September, according to two people with knowledge of the discussions.
The payments have shed light on the financial links between the state and Sakunda’s CEO, Kudakwashe Tagwirei, a businessman close to the governing Zanu-PF. Sakunda also owns a stake in Trafigura Zimbabwe, a joint venture with Trafigura, one of the world’s largest oil traders.
Sakunda received $366m in government bonds as payments for supplying “Command Agriculture”, a state farm subsidy scheme that Mnangagwa has championed. However, when Sakunda redeemed some of the bonds, the payouts were made in Zimbabwe dollars at an exchange rate that translated into massive money printing.
The redemptions led to an 80% surge in Zimbabwe’s monetary base money in circulation including bank reserves.
The IMF’s programme with Harare has set a target of 8%10% for 2019.
Mnangagwa has welcomed the account freeze, saying it would stop people from trying to undermine the currency.
Following the IMF warning, Zimbabwe’s regulators last week froze the bank accounts of Sakunda and other companies. The move temporarily halted a sharp decline in the Zimbabwe dollar.
However, the consequences of the payments to Sakunda have added to disquiet in Zimbabwe over allegations of “state capture the exploitation of public institutions and funds for private interests. Opposition politicians have accused Tagwirei of using his connections to the governing party and the central bank to build his business.
Tendai Biti, a former finance minister and MP with the opposition, said: “If ever there was state capture, it is Sakunda.”
Since replacing Robert Mugabe following a 2017 coup, Mnangagwa has vowed to make Zimbabwe “open for business”.
In February, he reintroduced the Zimbabwe dollar, a decade after its abolition in the aftermath of hyperinflation. But it has since fallen more than 60% against the US dollar, fuelling triple-digit inflation and dire shortages.
The $366m bonds were issued in US dollars in January the latest of hundreds of millions of dollars in government bonds issued to Sakunda in recent years. When the new currency was created a month later, Zimbabwean contracts in US dollars were generally converted oneto-one into the new currency.
But in July, Sakunda was paid by the central bank on the basis of eight to nine dollars per dollar of original face value, people with knowledge of the financial transactions said.
The government has denied any wrongdoing.
PAYOUTS TO SAKUNDA, OWNED BY AN ALLY OF THE PRESIDENT, ARE BEING MET BY THE CENTRAL BANK PRINTING MONEY