How sanctions are affecting Zimbabweans
ZIMBABWE’S Land Reform Programme in 2000 led the United States of America to impose illegal and unjustified sanctions under the Zimbabwe Democracy and Economic Recovery Act (Zidera) of 2001. The European Union (EU) also introduced its own sanctions in February, 2002.
Far from the claim that sanctions are ringfenced and targeted on a few individuals, the reality on the ground is that the tight grip of the declared and undeclared sanctions is being felt throughout the whole economy.
Sanctions have caused us great harm. They have affected people, companies and schools in Zimbabwe; wherever we are in the country.
The economic backlash
Zimbabwe has, for the past 20 years, failed to access lines of credit from international monetary institutions. Some of the country’s banks are also restricted from trading with international financial institutions.
Zimbabwe’s access to international credit markets was blocked after the enactment of Zidera. The country has been forced to virtually operate from hand to mouth. This unfavourable development has worsened the country’s creditworthiness as the country’s international financial risk profile escalated.
Under Zidera, American companies are not allowed to deal with Zimbabwean entities on the sanctions list.
Some companies associated with the State have had their money intercepted or blocked when they attempted to trade with international institutions. Companies have also found it challenging to move money into Zimbabwe because banks can be fined for dealing with sanctioned countries.
The US’ Treasury Office of Foreign Assets Control (Ofac) fined a Zimbabwean commercial bank US$2,48 million to resolve potential civil liability for 159 alleged violations of the sanctions regulations for transactions that took place between July 2008 and September 2013.
In 2017, another commercial bank was slapped with a staggering US$3,8 billion fine by Ofac for facilitating transactions on behalf of a bank which was then specified institution under Zidera. The penalty was only reduced to US$385 million after mitigation and negotiations.
Another bank had funds in all foreign bank accounts and in transit from or to clients frozen, while all contracts and business relationships with US citizens and corporates were abrogated.
In addition, the Small and Medium Enterprises Development Corporation had its USD 3 million blocked by Ofac. Some companies have been forced to close shop or scale down operations due to all of this.
This has led to a loss of jobs. International investors have also shied away from investing in Zimbabwe. Those who could be keen to do so are playing it safe.
Moreover, Zimbabwean importers are asked to pay cash upfront, resulting in a significant squeeze on private sector cash flows. This has led to bigger challenges, including under capacity utilisation of Zimbabwean companies.
Zimbabwean companies and individuals have found it extremely difficult to effect payments through the international payment platforms as these transactions are intercepted and blocked in the hostile countries.
Moreover, due to sanctions the country lost most of its niche and lucrative markets for horticulture products. Previously, farmers used to export horticulture produce to the Netherlands and the UK. However, these markets were closed due to sanctions, resulting in a significant decline in the horticulture industry. By 2005, horticulture exports had gone down to about US$72 million, with the value further tumbling to US$40 million by 2009.
The cotton industry is failing to access the EU markets directly, but only through middlemen, resulting in the loss of between 5 to 10 percent of the value of produce.