Akinwumi Adesina, president of the African Development Bank (AfDB), was the last top official to call on the government of Zimbabwe to respect human rights and take steps to facilitate free and credible elections at a debt restructuring rally in Harare on Feb. 23.
“The governance working group would enable us to address critical issues such as freedom of expression, protection of human rights and implementation of laws in accordance with the Constitution and make measurable progress, as well as the implementation of the Motlanthe Commission of Inquiry (see below) and compensation of victims,” Adesina told deputies.
“And we need to move forward with the Zimbabwe Democracy and Economic Recovery Act (ZIDERA) (see below). All this should lead to peaceful, free and fair elections. They will also remove headwinds on our path to clearing arrears and resolving debt.”
The meeting in Harare, the second meeting of the Platform for a Structured Dialogue on Arrears and Debt Settlement, was facilitated by former Mozambican President Joaquim Chissano, and was attended by Zimbabwean President Emmerson Mnangagwa, Finance Minister Mthuli Ncube, officials of the AfDB and ambassadors of lending countries. It followed a first meeting in early December.
As of September 2022, Zimbabwe owed more than $14 billion in foreign debt, including money owed to lenders including the International Monetary Fund (IMF), the Paris Club of creditors, the World Bank, AfDB and the European Investment Bank. The government has no access to new credit lines.
Effect of sanctions
In his speech, Adesina also argued that Western sanctions had played a role in creating Zimbabwe’s mountain of debt and arrears.
Zimbabwe has been subject to US sanctions since Congress passed the ZIDERA in 2001. It came in the wake of Zimbabwe’s chaotic land reform program, which dispossessed white farmers – until then the owners of much of the country’s most valuable farmland. without compensation from Robert Mugabe’s government.
The stated purpose of the law was “to support the people of Zimbabwe in their struggle to bring about peaceful, democratic change, achieve broad and equitable economic growth and restore the rule of law”.
Critics say Mnangagwa, who came to power in a military coup that ousted Mugabe in 2017, has failed to improve the human rights record or implement political and economic reforms – the basic requirements for US sanctions lifting.
In Harare in 2018, at least six protesters were shot dead by the military during a protest over delays in announcing the results of that year’s presidential election, while more than a dozen people were shot by law enforcement across the country in January 2019 following unrest above fuel price increases.
A commission of inquiry led by former South African interim president Kgalema Motlanthe into the deadly 2018 shootings has reported to the government, but its recommendations have yet to be implemented.
Restoring the rule of law is crucial
Stevenson Dhlamini, an economist and senior lecturer at Zimbabwe’s National University of Science and Technology in Bulawayo, says the absence of the rule of law continues to weigh on a solution to debt talks and the prospect of attracting new sources of investment.
“The prevailing rule of law is relevant for the country’s respect for the democratic privileges of its citizens and also good for attracting foreign direct investment. They are invaluable for the overall transformation of the country’s economy and the achievement of the Sustainable Development Goals.”
President Mnangagwa has pushed for renewed relations with Western countries and the US, but widespread skepticism about his record remains. Jee-A van der Linde, an economist at Oxford Economics Africa, says Zimbabwe is eager to prove to investors that things are changing.
“Zimbabwe is happy to draw a line under the long-running dispute and hopes that it will somewhat normalize relations with the international community, especially with those countries whose citizens will benefit from the settlement, and, perhaps more importantly, with international financial institutions.”
Compensation for white farmers
Compensating white farmers for land loss has been one of the key initiatives Mnangagwa says will help bring about rapprochement.
In 2020, the government agreed to pay $3.5 billion in compensation to local white farmers over 20 years, while allowing foreign white farmers to apply to get the land back.
On the sidelines of the Harare meeting, Finance Minister Ncube said the country now plans to make the compensation payments over a 10-year period, with the money raised through treasury bills. The hope is that a workable compensation deal for white farmers will allow progress to be made with lenders in the debt talks.
Mnangagwa said his government has drawn up a plan to clear $6 billion in delinquent debts to access international loans. But given the ailing state of the economy – the IMF expects growth of only 2.8% this year – economists are skeptical that the tight government will be able to make rapid progress on its back payments while supporting social spending and paying off white farmers.
“The truth is that the government does not have such resources and that may be the case for the next 10 years,” said Victor Bhoroma, an economist from Harare. “Ideally, debt service should be structured over a number of years, so that the government can also provide public services such as basic health care, decent education, good roads and clean water, which may be a priority now.”
Precious deal
Dhlamini says that while compensation for white farmers will signal that the government respects property rights, the cost of the deal is likely to worsen the debt situation. Instead of taking on more debt, the government should step up its tax burden to support future spending, he argues.
Van der Linde agrees that attracting new money on the international debt markets will be unattainable in the foreseeable future.
“It is incomprehensible that the government intends to tap into international debt markets at a time when global financial conditions have deteriorated significantly and there are so many other pressing economic problems in Zimbabwe,” he says.
“Reworking the controversial ‘land reform’ process is long overdue, but Zimbabwe simply cannot afford to take on more credit.”
Dhlamini says that while it is still early to judge the likely success of the debt restructuring meeting, it is clear that it has set a tone pointing to a commitment to transform Zimbabwe’s debt landscape.
“However, if Zimbabwe does not address fundamental macroeconomic imbalances, all efforts to restructure the debt will be powerless.”
