IN an unprecedented move, Zimbabwe has agreed to allow South Africa – the continent’s most developed economy and powerhouse – to sit in official Ministry of Finance meetings to oversee Harare’s debt clearance strategy tied to the country’s prospects of securing new funding, its reform agenda and economic recovery plan, confidential documents show.
Confidential minutes of Tuesday’s South Africa-Zimbabwe Bi-national Commission, exclusively obtained by the Zimbabwe Independent, show South Africa will “participate in stakeholders’ meetings which Zimbabwe’s Finance minister (Mthuli Ncube) holds on a regular basis, during which feedback is provided on the state of the economy and policy measures by government”.
The move by South Africa to monitor Zimbabwe’s economic affairs came after Pretoria demanded to know what was happening on the local economy and to get latest updates if it was to help engage creditors and countries suffocating the struggling Harare, now increasingly becoming a pariah state again.
After losing the support of the international community which it had reclaimed following the fall of former president Robert Mugabe in a November 2017 military coup, Zimbabwe has been sent scurrying for refuge and support from its neighbours. So far, Botswana and South Africa have shown willingness to come to its rescue.
Mozambique is also helping as shown by a US$25 million facility from its central bank and power supplies.
Zimbabwe is unable to get new funding and lines of credit largely because of the arrears, lack of a workable economic recovery plan, slow reforms and political instability, as well as human rights, rule of law, property rights and huge democratic deficit problems.
These difficulties are also discouraging foreign direct investment, keeping investors at bay and sometimes triggering capital flight.
The minutes also reveal Zimbabwe’s national debt has ballooned to US$18 billion from US$17,6 billion as the country sinks deeper into debt and arrears. The debt moved from US$16,9 billion in October last year to US$17,6 billion by end of year and now to US$18 billion; half of that being external obligations.
The minutes say Harare owes international financial institutions – the World Bank, African Development Bank and the European Investment Bank (EIB) – US$2,4 billion. It owes the World Bank arrears (US$1,3 billion), AfDB (US$650 million) and EIB (US$450 million).
While the updated World Bank figure is US$1,3 billion, AfBD arrears vary between two official figures – US$650 million and US$680 million. The EIB arrears are sometimes officially reported to be US$308 million or US$450 million.
Zimbabwe only repaid the International Monetary Fund (IMF) US$107,9 million arrears in November 2016.
Presenting an update on the “Lima Debt and Arrears Clearance Strategy” to the IMF/World Bank annual meetings in Bali, Indonesia, between October 8-14 last year, Ncube at the time said the national debt was US$16,9 billion, with external debt accounting for approximately US$7,4 billion. Out of this, approximately US$5,6 billion was in arrears.
Zimbabwe also owes the Paris Club US$2,7 billion and non-Paris Club creditors US$700 million.
Harare has asked Pretoria for a US$1,2 billion bailout, which is still under discussion.
Officials who attended this week’s meetings say the move by Pretoria to supervise Harare’s arrears clearance plan and the economy, diplomatically couched as an “invitation” in the minutes, shows South Africa’s growing leverage over Zimbabwe, hegemonic influence and its determination to ensure its proposed different funding facilities are not squandered by Harare’s extravagant rulers.
There are several facilities under discussion, which include a renewed standing facility between the two countries’ central banks, South African banks’ funding of the Zimbabwean private sector, sovereign guarantees and other financial options.
The two countries have 45 memoranda of understanding.
However, officials who attended this week’s summit told the Independent South Africa is agonising over the rescue package due to Zimbabwe’s debts and arrears profile, record of reckless spending, lack of meaningful progress on reforms and viable political dialogue.
This was despite Ramaphosa and his team noting some progress on Zimbabwe’s reform agenda and reconstruction plans.
The manoeuvre by Pretoria to supervise Harare’s economic affairs, which an official described as “extraordinary”, is seen in diplomatic circles as a reflection of South Africa’s regional hegemony and Zimbabwe’s desperation to clear its arrears, secure new funding and get a financial bailout.
“Ramaphosa has taken a firmer position to build closer relations between South Africa and Zimbabwe than his predecessors as a way of trying to reinforce his control over the situation, help out Harare and stabilise the country, while containing huge problems the local crisis is causing south of the Limpopo,” one well-briefed official told the Independent.
“He really wants to help; his administration realises that South African can only contain problems Zimbabwe is causing in its backyard and in the region by stabilising it and assisting it recover. This is a much more sustainable solution than allowing Zimbabwe to sink, become South Africa’s poor 10th province or take advantage of its problems to tap into its labour reservoir, shrinking market and resources. Already Zimbabwe is like a huge South African warehouse, but Ramaphosa wants to help with a sustainable solution. It is both in South Africa and Zimbabwe’s national interest.”
At the end of the Harare meetings, Ramaphosa said: “South Africa stands ready to render support to Zimbabwe within our means in your quest for economic renewal.”
For his part, Mnangagwa said he was grateful and acknowledged he did not take South African support for granted.
While South Africa was unable to provide a rescue package, its Finance minister Tito Mboweni’s delegation, the minutes show, agreed to help Zimbabwe to engage key international financial institutions such as the IMF, World Bank and AfDB, as well as the Paris Club and other creditors to deal with the arrears problem and new funding.
“Given the importance of investor perceptions in the success of any Paris Club resolutions, the commission agreed that communication with key stakeholders on economic updates and progress by the Zimbabwean government was required,” the minutes say. “Additionally, Zimbabwe should share information with South Africa to ensure that both countries speak with one voice when engaging the various stakeholders around the clearance of arrears.”
Pretoria is also going to help Harare fight mainly United States sanctions which were renewed last week. Ramaphosa has been vocal on sanctions and the need for re-engagement. This week he said Zimbabwe deserves support to get out of the current economic doldrums.
“The ministers also agreed that they would work together on re-engagement with international co-operating partners in support of Zimbabwe’s economic reform and debt arrears clearance agenda. South Africa will continue lending its voice and support within the various international forums for the clearance of debt arrears,” the minutes say.
“Zimbabwe is to extend an invitation to South Africa to participate in stakeholder meetings which Zimbabwe’s Finance minister holds on a regular basis, during which feedback is provided on the state of the economy and policy measures by the government (of Zimbabwe). Going forward, the two ministers agreed to work together on engagements with international partners to provide support towards the economic reform agenda of Zimbabwe.”
Besides financial cooperation, the summit agreed on non-financial assistance on issues like debt management; public-private partnerships; budget decentralisation; macro-economic policy frameworks; regional integration and macro-economic convergence at that level and fintech developments to enable banking and financial services.
“The minister of Finance and Economic Development for Zimbabwe, Hon Prof M. Ncube and his South African counterpart, Hon T. Mboweni and their delegates, as part of the third session of the BNC, met and exchanged views on the progress regarding the policy reform agenda being undertaken by Zimbabwe,” the minutes say. “The main thrust of the reform programme is macroeconomic stabilisation, attracting investment, re-integrating the country into the global community of nations and laying a strong foundation for shared and sustained inclusive growth.
The minutes further indicate that Ncube and Mboweni received an update regarding progress on the ongoing discussions for expanding the standing revolving facility arrangement between the two countries’ respective central banks.
“To this extent, the parties are exploring options of supporting the expansion of the standing facility,” the minutes say.
South Africa is Zimbabwe’s largest trading partner and home to millions of Zimbabwean immigrants who have flocked to the country running away from political instability, economic meltdown and seeking greener pastures.
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Publish date : 2019-03-15 17:54:55