How small businesses feel the pinch of sanctions

Source: How small businesses feel the pinch of sanctions | The Herald 22 OCT, 2019

Beaven Dhliwayo Features Writer

The Western-imposed sanctions on Zimbabwe are unleashing untold suffering to ordinary people as they have restricted efforts by Government to turn around the economy.

Contrary to the stated mission of sanctions on the country to provide for “transition to democracy and the promotion of economic recovery”, the measures are continuously unleashing untold suffering on the ordinary citizens including small and medium enterprises (SMEs).

Small businesses played an important role in keeping the country’s economy afloat during most trying times. Because of the sanctions, most are finding it difficult to stay afloat, closing shop with thousands losing jobs.

The sanctions on Zimbabwe are guided by the Office of Foreign Assets Control (OFAC) which enforces economic and trade sanctions based on US foreign policy, and the Zimbabwe Democracy and Economic Recovery Act (ZIDERA), a law which imposed economic sanctions on the country.

As long as sanctions are still in place, they will always pose direct and indirect challenges to the country making it harder for small entrepreneurs to access capital and to attract the sort of interest and engagement that will revive the economy.

It is now crystal clear that the measures amounted to a broader system of sanctions that affects not only individuals in the ruling ZANU-PF party but the economy and the generality of Zimbabweans.

One can see that the punitive measures by the West not only targeted a few individuals but barred any meaningful new investments from entering the country.

ZIDERA is opposed to any new loan, credit facilities or debt reduction initiatives destined for Zimbabwe by International Financial Institutions.

The Western sanctions effectively added to the investment pressures that had built up in Zimbabwe in the late 1990s when small enterprises couldn’t stand the heat.

SMEs in the country are unable to access lines of credits for working capital due to the sanctions. Donor organisations which used to support SMEs stopped doing so when the illegal sanctions were effected on the country.

This is a result of problems being faced by local banks and money transfer agencies in fulfilling their clients’ obligations owing to the termination of correspondent bank arrangements between local banks and international financial institutions.

Most experts agree that Western sanctions are aimed at protecting their communities, primarily economic interests, and have nothing to do with the promotion of democracy and human rights.

Small businesses are failing to sustain themselves because the country continues to function under harsh conditions stemming from its exclusion from the international community.

This has caused the country as a whole to be excluded from financial earnings associated with international trade.

Reports point out that illegal sanctions imposed on the country by the West prejudiced the SMEs sector of about US$35 million from 2008 to 2015.

This has resulted in a number of small businesses closing and thousands of jobs lost.

According to documents prepared by the Master of High Court’s office, about 55 companies were allowed to liquidate from November 2017 to December 2018.

Many companies, even big entities, continue to face challenges and are at high risk of closing if sanctions imposed on the country are not lifted immediately.

This means that efforts by the Second Republic to create jobs for Zimbabweans will come to nought as a result of sanctions which have brought the country’s economy onto its knees.

Despite the fact that a lot has been said about the effects on some sectors such as farming, manufacturing and mining, little attention has been given on how the unlawful restriction has adversely affected small businesses.

Contrary to the claim that the measures are ring-fenced and targeted at a few individuals, it has become apparent that their effects are being felt across all sectors of the economy, including SMEs.

The economic embargo has resulted in inadequate infrastructure in the country. High rentals is one of the major problems being faced by SMEs forcing small businesses to operate in undesignated areas.

Funding will remain key to the revival of small businesses in the country.

Youths used to be active in SMEs and if given the chance they are more than willing to help revive the country’s economy.

Removing sanctions will help ease youth unemployment which has reached astronomical levels owing to the growing youth bulge.

There is need to be lenient on the country because as it stands, ZIDERA make it almost impossible for Zimbabwe to access new funding to support projects, such as revival of SMEs, from the World Bank and other multilateral finance institutions.

For example, the amended ZIDERA is clear that it will penalise the African Development Bank (AfDB), which remains crucial for the country’s recovery, if it decides to cancel Zimbabwe’s debt.

ZIDERA says: “The United States government shall withhold funding for the African Development Fund equivalent to any funding provided to Zimbabwe through Pillar II for arrears clearance.”

Additionally, in 2016, OFAC fined Barclays Bank Plc US$2,48 million to resolve potential civil liability for 159 apparent violations of the Zimbabwe sanctions regulations.

There are other several banks which cannot effect financial transactions that involve Zimbabwean companies.

From the arguments above, it is crystal clear that illegal sanctions are damaging local financial services and payments systems.

They are also affecting anyone or anything associated with Zimbabwe hence there is need for them to be lifted.

What it implies is that efforts by the Second Republic on debt relief plans are unlikely to see the light of day as long as ZIDERA remains in place.

Of late, Western countries are increasingly feeling the pinch, and are also wondering whether their favourite economic power tool has been so overused as it is becoming counter-productive.

Therefore, SADC members should this Friday, collectively voice their disapproval of sanctions against Zimbabwe.

After all, Zimbabwe has opened a new chapter and is ready to engage with the rest of the world.

It should be in the interest of all parties concerned to see that sanctions are lifted for the betterment of the people of Zimbabwe.


  • comment-avatar
    Tendai 3 years ago

    The lack of foreign investment has got nothing to do with sanctions .

    The cause of our problems is no rule of law,
    land and property confiscation,
    no electricity,
    no proper healthcare,
    no fuel,
    no currency,
    Police taking bribes,
    human rights abuses,
    broken infrastructure,
    nothing works due to no maintenance,
    rampant inflation by printing money,
    Government waste of money,
    theft by senior politicians,
    election rigging