Zimbabwe looks to SA for financial support
Struggling nation’s debt runs beyond $9bn
ZIMBABWE has turned to its southern neighbour and other external sources for financial support in its bid to secure much needed financing to fund an economic programme that has remained stuck on paper owing to budgetary constraints and waning appetite by investors.
Saddled with a debt running beyond $9 billion (R98bn) and nervy investors who are unwilling to take additional political, regulatory and operating risks occasioned by an uncertain environment, Zimbabwe’s economy is struggling.
Profitability prospects for businesses and companies have taken a knock while the country’s populace is battling rising unemployment, two major factors that have led to the informalisation of the economy.
Despite being told to fix its regulatory framework and to restore certainty to the operating framework, Zimbabwean government officials are turning to the international community for fresh funding.
Even those source markets previously considered hostile such as Britain are viewed as potential sources for key funding and investment facilities.
Declining confidence in the country’s financial services sector is also hobbling the economy, with the informal sector booming. Most of the locally owned banks are struggling for liquidity while the rate of nonperforming loans is spiking.
“The productive sector is evidently struggling, with productivity going down. If we are to revive the economy, it starts with having a plan to boost production but the key sector for all this – the financial services sector – is also struggling for liquidity and the banks are not sure if borrowers will be able to pay back,” an executive with a Johannesburg-based investment fund manager said.
Last week, senior Zimbabwe government officials staged a conference in Johannesburg in a bid to lure South African investors to sink money into Zimbabwean projects. Central bank governor John Mangudya and Finance Minister Patrick Chinamasa – who both made presentations in Johannesburg – have written to the International Monetary Fund (IMF) seeking new assistance, even though the country has not yet cleared its arrears.
Government sources in Zimbabwe say the government is pushing for cancellation of the debt it owes the IMF. However, this is highly unlikely, with Dominico Fanezzi, who headed an IMF mission to Zimbabwe in September, saying: “Zimbabwe cannot be on the Highly Indebted Poor Countries status” as qualifying countries “have to be very, very poor.”
Some of the international funders that Zimbabwe owes such as the Paris Club and IMF are said to be open to concrete plans for debt rescheduling as Zimbabwe is currently financially crippled.
Chinamasa and Mangudya said in Zimbabwe’s re-engagement letter to the IMF this month that “as part of the Zimbabwe Agenda for Sustainable Socio-Economic Transformation, we also intend to accelerate our re-engagement on debt resolution with all our creditors”, including the international financial institutions.
Chinamasa told the South African conference on Friday that Zimbabwe was trying to fix the uncertainty that was deterring investors willing to invest in Zimbabwe.
“I believe South African investors have a moral and business obligation to invest in Zimbabwe or we will continue bothering you. It’s in your interest,” he said.
He added that Zimbabwe was addressing uncertainty concerns raised by investors regarding the empowerment and indigenisation policy.
In its current format, it requires that all foreign owned firms cede 51 percent majority shares into the hands of black Zimbabwean groups, including community and employee share ownership schemes.
However, the mining sector – in which Anglo Platinum, Aquarius Platinum and Impala Platinum have key operations – will not be affected by the new changes the government is planning, with Chinamasa saying “mining will be treated differently” as the “mineral… belongs to the state”.
On Thursday, Chinamasa will present Zimbabwe’s fiscal policy statement for 2015.