Hit by more Western sanctions, Zimbabwe is now relying on neighbours for emergency bailout packages to patch over a national cash crunch that has sparked political unrest against President Emmerson Mnangagwa.
This comes after US President Donald Trump on Monday extended sanctions against Zimbabwe by a year, maintaining the national emergency declared in a previous Executive Order. This renewal comes in spite of increasing calls by African leaders to give the crisis-stricken nation some reprieve.
Earlier, South African President Cyril Ramaphosa called for sanctions against Zimbabwe to be lifted at the World Economic Forum in Davos, Switzerland. South Africa hosts the largest number of Zimbabwean migrants at three million, according to the United
Nations’ International Organisation for Migration. Ramaphosa maintains that Zimbabwe’s situation presents a challenge for the entire African continent, saying the cash-strapped nation faces “serious, serious, economic challenges and they can be assisted by the world if those sanctions are lifted.”
Analysts said it is no secret that Zimbabwe is at the end of its tether, and one can certainly sense the desperation.
In search of aid closer to home, Mnangagwa received Botswana President Mokgweetsi Eric Masisi in Harare last week for the inaugural Zimbabwe-Botswana Bi-National Commission (BNC) with Ramaphosa due in Harare for another BNC.
While the two leaders worked to re-establish mutually beneficial relations, Zimbabwe’s ministry of Foreign Affairs secretary made a huge gaffe by claiming that neighbouring Botswana was prepared to give Zimbabwe a $600m loan, of which $500m would go to the local diamond industry and $100m to private firms. It turned out to be false.
After the Botswana leader returned to Gaborone, Masisi said: “I want to clarify these reports that we are giving Zimbabwe hundreds of millions in loans. That is totally untrue. “We are not giving them a single loan. The only thing we gave them were medical supplies made in Botswana and supplementary feeding …”
More recently, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya announced that the central bank has secured $985m in loans from various African banks to purchase fuel and other essential imports. Of the $985m, $641m is to come from the African Export and Import Bank, $152m from Eastern and Southern African Trade and Development Bank, and $25m from Bank of Mozambique, among others.
That being said, this time it would not be backed by diamonds, “these loans are well structured facilities contracted last year. They will be paid from future (gold) export receivables,” Mangudya told a parliamentary committee.
This follows a request made by Zimbabwean authorities in December 2018 to South Africa for financial aid of $1,2bn to help settle some of its debt — the regional powerhouse declined. However, South Africa’s Finance minister, Tito Mboweni, has said that the country is planning to extend short-term credit to its northern neighbour while alluding to helping write off Zimbabwe’s enormous external debt bill.
NKC African Economics analyst Jee-A Van Der Linde said the move by Trump cements the notion that the West remains firmly reluctant to offer Zimbabwe support.
According to Mangudya, government borrowing from the RBZ stood at nearly $3bn in December 2018, almost three times the customary overdraft limit. “Drowning in debt, we believe that it is unlikely that Zimbabwe will receive the handouts that it yearns for,” Linde said.
“If it does do, they will come at a price. Zimbabwe’s vast mineral endowments offer considerable potential, but the countless economic challenges are keeping investors at bay — though not all of them.
“Corrective interventions are likely to continue to be ad-hoc and ineffective without significant international assistance, that itself remains dependent on structural reforms that require some measure of outside help.”