In May 2005, after months of work to win agreement from Robert Mugabe's usual international backers that they would not intervene, SA president Thabo Mbeki offered Zimbabwe a financial bailout - with conditions. It seemed Mugabe would have no choice but to agree. However, he once again outwitted his South African interlocutor, and ordered his finance chief, Gideon Gono to raid the foreign exchange accounts of Zimbabwean businesses in order to get the US$50-million he needed to pay the International Monetary Fund to avoid expulsion from the fund when it next met to review Zimbabwe’s status. My 8 May 2005 report on the proposed bailout:
DATE=05/08/2005
TYPE=BACKGROUND
REPORT
TITLE= SAF
ZIMBABWE
NUMBER=5-
BYLINE= DELIA
ROBERTSON
DATELINE=JOHANNESBURG
CONTENT=
VOICED AT:
HEADLINE:
INTRO: At a meeting in Pretoria, South African
Finance Minister Trevor Manuel has informed Zimbabwe’s Finance Minister Herbert
Murerwa of South Africa’s conditions for paying a portion of Zimbabwe’s debt to
the International Monetary Fund to prevent that country’s expulsion from the
IMF. Also present at the meeting were
the two countries’ central bank governors.
From our Southern Africa bureau in Johannesburg, VOA’s Delia Robertson
takes a closer look at the political and economic implications of the bailout.
TEXT: For more than a month, Zimbabwe President
Robert Mugabe has been trying to source a loan of some US$1-billion to make
minimum payments on Zimbabwe’s debt, to fund food and agricultural products,
and to pay for fuel.
Last month
South Africa said it would consider providing a line of credit to Zimbabwe, but
attached several economic and political conditions to the offer. Mr Mugabe balked at the terms and instead
went to China hoping for an unconditional loan – only to find that his warm
welcome in Beijing did not include the assistance he was seeking.
At a
minimum Zimbabwe needs to pay the International Monetary Fund US$50-million in
order to avoid expulsion from the fund when it next meets to review Zimbabwe’s
status. Zimbabwe is currently
US$295-million in arrears with the IMF and this, together with its other
international debts, could accrue to a US$1-billion balance of payments deficit
by the first quarter of 2006.
This week Mr
Mugabe’s emmissaries were back in South Africa, where they were offered about
10-percent of the US$1-billion they want.
In addition they will have to
commit to urgently engage in negotiations with the opposition Movement for
Democratic Change, constitutional reforms, restoration of the rule of law, and
the repeal of repressive laws such as those which inhibit a free media.
In addition
to the political conditions, Finance Minister Manuel will want to see Zimbabwe
implement an economic recovery plan that can be sustained over the long
term. The money will be paid in
tranches, based on Zimbabwe meeting defined commitments. And, it will not be handed to the government
to spend as it pleases. Instead it will
be paid to international lenders, and directly to suppliers of energy, fuel,
food and other essential goods.
South African officials have not publically confirmed these conditions – instead only saying any assistance must go to "economic recovery" and "political normalization" and that South Africa’s dealing with other countries are not based on conditions. Privately however, government officials are expressing relief that South Africa now has some leverage to influence developments in Zimbabwe. It’s a leverage, says political analyst John Stremlau, that Mr. Mbeki has not had in the past in his dealings with Mr. Mugabe.
///STREMLAU
ACT.///
As I’ve
said so often in the past, if you think hard about what South Africa’s leverage
over Zimbabwe is short of pulling the the kind of intervention that say the
U.S. did in Iraq, there doesn’t seem to be a number of levers that were
pullable.
///END
ACT.///
But Mr
Mugabe has in recent weeks frequently said that he would not accept any
assistance that comes with conditions.
And, in fact, has refused to ask the World Food Program for food
assistance even though as many as four million Zimbabweans are expected to
require food aid by early next year.
Before he
visited Zimbabwe in May, the WFP’s James Morris made it clear that the only
condition he would attach to such assistance, would be that the United Nations
and its partners in the humanitarian sector in Zimbabwe would distribute the
food.
Mr Stremlau
of the the University of the Witwatersrand in Johannesburg, says Mr Mugabe is
likely to continue to resist South Africa’s prodding toward change for as long
as he can.
///2ND
STEMLAU ACT.///
30: I don’t think any of us can predict whehter
or not Mugabe is prepared to compromise his policies which have raised such
international concern. South Africa’s
central interest has been to promote a government of national unity which would
allow Mugabe to step aside and for a new breed and a will of leadership to
emerge and I think that’s probably what is behind this bargaining around the
loan.
///END
ACT.///
Zimbabwean
economist Tony Hawkins says that even if South Africa were to loan Zimbabwe the
full amount it wants, the benefits would not last long.
///HAWKINS
ACT.///
I don’t think it
would have anything like as major effect as some are suggesting. In the current year, it looks as though
zimbabwe is going to run a balance of payments deficit in the region of
US$700-million to US$1-billion – so it could well be that if this loan were to
materialize, it would be pretty much used up by the first quarter of next year.
///END
ACT.///
In the past
six years Zimbabwe’s economy has contracted by 40-percent, and the formal
sector has shed 450-thousand jobs – down one third from 1.4-million. Professor Hawkins of the Univeristy of
Zimbabwe says the effects have been far-reaching.
///2ND
HAWKINS ACT.///
People are
obviously an awful lot poorer than they were.
Incomes are on average about 40 percent lower; we have seen a big
outflow of skills, black skills, white skills – a lot of the younger people
have moved on. We have seen shrinkage in
terms of companies, a number of foreign companies have just sold out and moved
off – or relocated some of their operations, mostly to South Africa. We have seen virtually no investment since
2000, we have seen a very serious deterioration in underlying infrastructure –
anything from urban lighting, and sewerage and housing, right through to
telephones, railways, aircraft, electricity provision.
///END ACT.///
The World Bank
estimates that until the government’s recent forced removals campaign, the
informal sector comprised 60-percent of Zimbabwe’s economy. Mr Hawkins says the losses to the informal
sector have affected suppliers in the formal economy, but he says the real
effect has been to those people who made what was already a meagre income by
selling from the streets or other micro-businesses.
///3rd
HAWKINS ACT.///
And if you follow
that one down it’s a knock on effect in the formal sector, but in the informal
sector level, you have people who a few months were earning 5-6 hundred
thousand Zimbabwe dollars a day from selling vegetables to people on street
corners. And we are now told that they
are perhaps earning 1- or 2-hundred thousand dollars a day, by doing the same
thing very clandestinely.
///END ACT.///
Professor
Hawkins says that even if Zimbabwe does accept and implement the conditions set
by South Africa and uses the money over the coming year to recover from its
current crises, longterm recovery in the Zimbabwe economy will be very slow.
He says it
will take at least eighteen months for Zimbabwe to re-establish a record of
compliance with international lenders and start receiving assistance again. And says Professor Hawkins, it will take at
least a decade for the economy to start growing again. (Signed)
NEB/DAR/
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