Zim-EU in talks on finance

via Zim-EU in talks on budget finance – The Zimbabwe Independent. 13 June 2014 by Taurai Mangudhla

ZIMBABWE stands to benefit from the European Union (EU)’s softened stance on the Zanu PF government, which is expected to see the 28-nation bloc scrapping economic sanctions against the troubled southern African country, economists say.

Last week, EU Ambassador to Zimbabwe Aldo Dell’Ariccia said Zimbabwe and the EU were currently engaged in crucial negotiations that could see the EU, for the first time in more than a decade, among other things directly help finance the southern African country’s national budget and finalise a National Indicative Programme (NIP).

The NIP expected to be completed by November 2014 and unlock at least €234 million worth of developmental aid in areas such as agriculture, health and education into Zimbabwe.

Dell’Arricia said according to the draft NIP, the EU proposes to fund €88 million to the health sector, €88 million to agriculture-based economic development while governance and institution building will get €45 million.

Civil society support is set at €6 million while support to the national authorising officer will be €3 million; the technical co-operation facility will get €4 million.

Top local economist Eric Bloch said the NIP and other agreements expected to follow were positive developments to the Zimbabwean economy.
“This is a very positive development and it’s not only the €230 million we are talking about because once we have good relations with the EU then investment inflows into mining, tourism and agriculture will improve,” Bloch said.

“It’s likely to be a confidence booster to other countries outside the EU and a major stimulant to the economy.”

He, however, said the EU’s positive reengagement alone was not enough to turnaround the Zimbabwean economy as a positive policy environment should support the initiative and boost foreign investor confidence.

“It depends on what other polices government will implement,” Bloch said.

Econometer Global Capital head of research Takunda Mugaga said the EU’s stance was an indication the bloc had abandoned a combative approach against Zimbabwe, but is not expected to yield any results.

He said the move could be used to test if the Zanu PF government can ever be trusted politically.

“The EU is not being confrontational, it’s being more conciliatory than ever before which will not change anything. I don’t know if the EU is being sincere or they are being prevaricative, the way I see it is that some of the differences have been about personalities and Mugabe (President Robert) is still there,” Mugaga said.

“The Zanu Pf of today will not be different from the Zanu PF of tomorrow and Zanu PF dominance is there for at least another five years after their victory last year. I do not see any meaningful developments in terms of governance and democracy in Zimbabwe in the next 12 months.”

Issues in terms of governance still remain, respect for property rights still remains and indigenisation was one such policy that brings property rights into question.

The Eu has been a significant trade partner for Zimbabwe with statistics showing trade between the two doubled in the first four years of the transition to multi-currencies in 2009, reaching a total of US$800 million as at end of 2012, with the terms of trade being US$200 million in Zimbabwe’s favour.

Harare ratified the interim Economic Partnership Agreement between the EU and Eastern and Southern African states, giving the country unlimited opportunities to export its products to countries in the bloc duty free and quota free.

Currently, Del’Arricia said the EU was supporting Zimbabwe to boost beef exports into the 28-nation bloc.

He said the EU was assisting with zoning of the country and fighting foot and mouth to clearly give the source of the beef as required by the EU.
The EU is also the top export market for Zimbabwean sugar, buying most of the surplus after the local market is adequately supplied.
The EU is funding a number of infrastructure projects under the Canelands Trust in Chiredzi.

In 2002, the EU stopped direct aid to the Zimbabwean government after imposing restrictive measures on Mugabe and his inner cabal as well as companies linked to them amid accusations of gross human rights violations, democratic principles and the breakdown of the rule of law under the Cotonou Agreement.

If the EU lifts economic sanctions on Zimbabwe, the southern African country stands to benefit from the 11th European Development Fund which supports development programmes in Africa, Caribbean and Pacific countries and runs from 2014 to 2020.