Zim­babwe looks to SA for fi­nan­cial support

Strug­gling na­tion’s debt runs beyond $9bn

The Star Early Edition - - FRONT PAGE - Tawanda Karombo Harare

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.

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