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  • Writer's picturerutendo matinyarare

SANCTIONS OR CORRUPTION DESTROYING ZIMBABWE?

Updated: Jul 9, 2022




Introduction.


On many occasions people have sent me an article titled “It’s Not Sanctions, It’s Corruption and Lack of Reform” penned by the US ambassador Brain Nichols on the 24th of October 2019. Those sending this article use it to advance the argument that the economic hardships in Zimbabwe are caused by corruption and not sanctions. So by deduction those of us fighting sanctions should abrogate our citizen duties of national defense and fight corruption.


Unfortunately when this article came out, our media monitoring [ at ZUAUWS] never picked it up, as a result we never got to respond to this piece officially.


Nevertheless, two articles based on the same argument were then written by two media houses: Zimbabwe Online on the 14th of October 2019 and South Africa’s IOL on the 25th of November 2019 with the heading “Lifting Sanctions On Zimbabwe Won’t Solve Zimbabwe’s Woes”.


It would seem that both articles used the same discredited arguments made by Brian Nichols as their source. We responded comprehensively and directly to each of the media houses, posting the responses on social media and subsequently the articles were reposted by various African publications like the Herald and Africa.


Since then, we never got a response from Zimbabwean Voice, which is typical of the unprofessional approach of most adhoc Zimbabwean publications. As for the South African publication, soon after our letter, IOL wrote an article quoting Rutendo Matinyarare as having argued that sanctions are responsible for the demise of the Zimbabwean economy and not corruption. Not exactly a retraction but they were compelled to acknowledge that there is another side to the story of sanctions in Zimbabwe other than the propaganda advanced by the United States government.


Nothwithstanding, in October 2021, the Special Rapporteur for the negative impact of sanctions, came to Zimbabwe and measured the negative impact of sanctions which she declared illegal and as violating civilian human rights,


Considering that there is quite a body of work building around debunking the myth that Zimbabwean sanctions are not on the people. I was a bit ambivalent about writing another piece if Zimbabweans lack the desire to read the existing articles.


Nevertheless, for the purpose of adding to the growing portfolio of intellectual work on the complex subject, I have decided to put another account on record for the benefit of our academics, intellectuals and authors as they work to demystify this economic warfare that is upon the people of Zimbabwe.


Sanctions Are From The Same Toolbox As Slavery And Colonialism.


History must be clear that in the same way slavery and colonialism were used to under-develop black and brown peoples across the world for centuries -including Brian Nichols’ ancestors- the collective punishment of 17mil innocent Zimbabweans by his government’s illegal sanctions [an extension of that same culture of white domination and criminality that was slavery and colonialism] is unequivocally responsible for the challenges millions of Zimbabweans face today as the US work to hinder economic growth and competitiveness in Africa.


As with slavery and the genocide of American Indians over the centuries, the US imposed these illegal economic measures to destroy the capacity of black Zimbabweans to control our resources and use them to advance the nation. This is something Kissinger promoted in NSSM39 to stop the radicalization of Africans so that they wouldn’t compete with US economic interests by controlling the region’s strategic mineral resources.


All things being equal, the cause and effect of sanctions is pretty clear when considering that from 1980, the same government that is under sanctions today, built one of the most stable economies of some of the most educated people in Africa in just 25 years from 1980 to 2005. By so doing, Zimbabwe attracted many migrants from South Africa, Zambia, Angola, Mozambique and Botswana to seek refuge, education, skills training and healthcare over the 25 year period, despite corruption being a cancer inherited from the colonial capitalist system.


So let’s address the arguments proffered by ambassador Nichols:


1. Sanctions Are Only On 141 Nationals.


The United States have invested a lot of resources to drive the narrative that Zimbabwean sanctions are only on 141 individuals. A claim reinforced by Ambassador Nichols in his propaganda piece.


Agribank, IDBZ And Ten Other Parastatals Are Not Individuals.


• The problem is the claim is false, and by the United States recently removing sanctions on AgriBank and the Infrastructure Development Bank of Zimbabwe [IDBZ] in 2020, it’s clear that sanctions are not only on individuals but key national institutions that are central to the critical function of the Zimbabwean economy.


• By targeting public [national] institutions, the sanctions like carpet bombing a city to destroy government buildings, factories, hospitals, roads, water and sanitation in wartime, directly target the people of Zimbabwe. Suffice to say, such an unnecessary, disproportionate and indiscriminate bombing of civilian infrastructure in wartime is illegal and a war crime according to the Geneva Convention. This, by deduction, means that the same collective punishment of civilians by persecution of sanctions in peace time is illegal and a crime against humanity.



• ZDERA is a clear example of how US sanctions target Zimbabweans collectively through blocking the government from accessing debt and colonial debt cancellation.


• To create this coercive measure, we saw the very esteemed US Congress converge to create a specific law for a small insignificant little country called Zimbabwe, that was threatening the colonial world order by taking back colonized [stolen] factors of production [land, resources, labor and economy] from white settlers to put them back into the hands of their rightful dispossessed black owners.


• That law was misleadingly called Zimbabwe Democracy and Economic Recovery Act or ZDERA, yet it was crafted to handicap [not recover] the Zimbabwean economy by prohibiting the government (national & local governments), ministries, state-owned enterprises and institutions from getting development & reconstruction loans and more importantly, blocking cancellation of colonial debt by multi-lateral lending institutions like the IMF, the World Bank and the International Development and Reconstruction Bank.


• Congress also intended for the act to bring political change by coercion whether Zimbabweans wanted the change or not, hence the policy statement says the act [ of sanctions] seeks to assist Zimbabweans to achieve democratic change.


• This means, the sanctions affect the ability of the national government, local governments, ministries and parastatals to borrow money to deliver basic services like water, sanitation, electricity, education, social development, disaster relief and support of businesses in the country. More critically, they limit the government’s capacity to service the most vulnerable members of our society who constitute over 60% of our population.


• These sanctions also prohibit reconstruction of the country from colonial pillage, the devastation of the 17 years of liberation war which displaced a million Zimbabweans and for which the country never received restitution or reparations to rebuild.


• They also prevent the nation from seeking redress for the destabilization visited upon Zimbabwe and SADC by the apartheid South African government (1980-1992) in pursuit of a negotiated settlement desired by Kissinger’s NSSM39, to preserve white domination and ill-gotten property rights. This destabilization cost Zimbabwe in excess of $2.8 billion ($4.7bil today) and SADC over $60 billion (over $100 billion today).


ZDERA Transfers The Colonial Legacy And Its Debts As The First Sanctions Zimbabwe Inherited.

• As a result, ZDERA has maintained the yoke of short term, high interest colonial loans of about US$800 million [US$2,4 billion today] taken by the Rhodesian government illegally during UN sanctions, to buy weapons, in an effort to stop Zimbabwean liberation fighters from getting independence.


• These loans, which had to be repaid by 1987 at interests of above 11%/annum, were repaid by the IMF and other multi-lateral institutions forcing the government to take more loans to pay off these colonial debts to maintain a good credit rating.


• These repayment loans were bundled into a US$1 billion package from the IMF, Standard Chartered Bank and Barclays, raised to: save Zimbabwe from the terrible drought and recession of 1984; kickstart the construction of 5709 schools, 1261 hospitals and clinics, the creation of 19321 new hospital beds; construction of 700 000 houses, Hwange Power Station phase 1-4 to produce 1500kw of electricity output and 7000km of roads that were not built by the colonial government in contravention of their Human Rights legal obligations.


• The mathematicians among us would know that any debt above 10% interest, doubles every 7yrs because of compound interest. The implication being Rhodesian sanctions, their underdevelopment and high interest debts doubling every 7yrs, were inherited by the Zimbabwean government to become the first set of sanctions [restrictions] upon the recently independent country.


IMF Sabotage.


• After independence, the Zim dollar was devalued quickly by government to meet the onerous conditions imposed by the IMF for the country to access loans to develop the infrastructure outlined above. Repayment of previous debts and new debts had to be sustained by government taking more loans as narrated previously, however, the IMF refused to give any loans for reindustrialization, technology upgrades and retooling in manufacturing (the same thing US sanctions are doing today). It was a deliberate strategy to deindustrialize Africa as the Morgentheu Plan that was designed for Germany and then repurposed for Africa, prescribed.


Accompanying that, the government was also induced to buy back idol land from the colonial settlers at market prices, in foreign currency, in the name of reconciliation. These unsustainable financial obligations would lead to ESAP and eventually an inevitable default on compounding colonial legacy debt repayments that the nation can’t cancel today due to ZDERA.


• ZDERA therefore affects each and every Zimbabwean and not a few targeted individuals. The colonial debts and their interest, continue to mount, inhibiting reconstruction, capital accumulation, the building of power generation capacity, roads, hospitals and railways, to lift ordinary people out of poverty in line with the UN Millennium Development Goals and Sustainable Development Goals. It was for the purpose of stopping economic development in Zimbabwe [in line with the African Morgentheu Plan], that ZDERA was enacted with similar restrictions placed upon blacks during slavery and Jim Crow and the American Indians under the Monroe Doctrine.


Executive Order Sanctions.



• When ZDERA failed to achieve the desired outcome of stumbling this socialist economic dynamo that threatened the western capitalist order; a new hurdle was engineered in 2003 when a National Emergency was declared on 58 Special Designated Nationals of Zimbabwe by the United States President George W Bush.


• From this, the unilateral and illegal Executive Order sanctions EO13288 were activated on these SDNs [Special Designated Nationals] who included government officials, state owned enterprises, key national investors and financial institutions in the country, to prevent them and anyone who is doing business with them, from transacting with US companies, organizations, citizens and foreigners from other countries seeking to do business in the US.


• Even more insidiously, sanctions were placed on government officials to deliberately prevent them from attending western meetings with regional and continental partners, in order to exclude the country from trade and economic agreements.



• In 2005, the executive order was amended to EO13391 sanctions so as to add more names of companies, state owned enterprises, shareholders and relatives of the former SDNs. This took the number of sanctioned people to 87 entities, putting a huge spanner in the economic engine of the country because the two previous measures were failing to break the small economy.



• As Zimbabwe held out longer, the US and the west became concerned about the resilience of the economy that was not collapsing from the sanctions or the much punted corruption, because they had expected the country to crash in 2yrs of ZDERA. Additionally, not only was this economy not collapsing but the citizens kept re-electing the socialist government of Robert Mugabe and Zanu PF whom the sanctions were designed to remove through elections.


• As a result, on the 25th of July 2008, the US President escalated the measures by declaring another National Emergency. This time it was expressly on the government of Zimbabwe itself [just like ZDERA] and an additional 57 names were added to impose Executive Orders EO13469 on 144 SDNs [Special Designated Nationals].


• The declaration of a national emergency that identified the Zimbabwean government, by deduction the state, as an unusual and extraordinary threat to US national economic, foreign policy and security interests; evoked the deployment of economic weapons of the #InternationalEmergencyEconomicPowersAct (IEEPA) upon the state to neutralize the threat it posed on the US world order.


• These weapons as stipulated in the act, mandate US banks and any other banks that want relations with the western banking system, not to process Zimbabwean payments [not just government but private sector]; prohibit US companies from trading, investing, lending, exporting to, selling machinery, tools or any technology to Zimbabwe without a license from the US President. It also prohibits any assistance from being given to the Zimbabwean people [17mil people] by NGOs without similar license.


• These restrictions saw companies like Microsoft, Oracle, Mazda, Dunlop, Bata, Voest of ZISCO, PG Glass other similar MNCs and major NGOs that were in Zimbabwe, closing shop and leaving the country because of these US restrictions.


Extra-jurisdictional Sanctions.


• The IEEPA does not only restrict US persons and juristic entities [organizations] from doing business with Zimbabwe without a license from the US President but it also has extra-jurisdictional reach upon third party, foreign persons and entities who are prohibited from ASSISTING identified THREATS [Zimbabwe] to US Economic, Security and Foreign Policy Interests, through processing payments, trading, buying, selling or assisting them with products, software, technology, investment, machinery, tools or logistics without permission from the US President.


• Contravention of these sanctions can see companies that do business in the United States or those using US dollars to transact, being investigated, indicted, directors arrested, assets confiscated, financial assets in the US or ally nations being frozen, penalties being imposed and secondary sanctions similar to those being imposed on Zimbabwe being levied upon those breaking the sanctions.


These are the lengths the US will go to stop investors, businesses or organizations from assisting enemies or threats to the United States like Zimbabwe, illustrating a clear intent to destroy “the enemy” by economic weapons.


Third Party Transfer License Limitations.


• Furthermore, US IEEPA sanctions also come with third party transfer license restrictions that bar any company using US technology in its products, be it chips, code or parts made in the US, Europe or any other ally of the US [Japan, Korea, Asian Tigers] from selling such technology onto nations under US sanctions without license from the US President.


International Emergency Economic Powers Act.


• The IEEPA is an act of war, which falls under Defense and War in US code Title 50. Most people across the world run the risk of contravening these sanctions because they all focus on the prescripts of the executive orders, but they ignore the #InternationalEmergencyEconomicPowersAct, which are separate and standard war and defense restrictions or economic measures [weapons] used on threats to US interests, to neutralize the threat economically.


All the same, if the threat is not neutralized by the economic weapons, the US President is given authority by the same act, to escalate the national emergency to put boots on the ground of the country under sanctions.


Who Is Under These Sanctions?


As of the National Emergency of the 25th of July 2008, threats to US interests are the Government of Zimbabwe, its ministries, local governments, state owned enterprises, key investors and business people to make up the 144 Special Designated Nationals and in line with the IEEPA prohibitions outlined above:

• any company, person or institution that has assisted, sold products; offered services, technology and assistance (paying taxes) to Zimbabwe, without license from the US President is under the threat of extra-jurisdictional, secondary sanctions and penalties at the discretion of the US President.


In many ways these sanctions are upon 17mil Zimbabweans and any other person, companies or organizations from other nations that have traded with Zimbabwe since 2003.


• Consequently, any transaction undertaken from Zimbabwe [irrespective of who makes it] comes under scrutinbanks and companies across the world are reluctant to engage Zimbabweans due to fear of US OFAC penalties. As a result companies across the world will not sell technology, machinery, tools, software and services to Zimbabwe if they risk facing investigation, secondary sanctions, arrest of directors, confiscation of assets, freezing of financial assets, blockage of payments or being excluded from trading in the US.


Penalties And Impact


IDC


• As a result in 2010, IDC South Africa pulled out of a US$10mil deal to finance IDCZ to retool Zimphos and Dorowa for the production of phosphate fertilizer and water treatment chemicals for Zimbabwean municipalities that needed chemicals for water treatment.


• 2013 Barclays was fined US$2.5mil for processing US$3.4mil payments on behalf of IDCZ which was meant for retooling plants that serve municipalities.


• Subsequently Standard Bank would close IDCZ’s accounts to avoid penalties for having the company as a client.


• Between 2008 and 2013 IDCZ lost over $20mil to siezures by OFAC (Office Of Foreign Assets Control),


• Over the same period $2mil from PTA Bank for retooling a soap and oil factory at Olivine [a IDC subsidiary] was seized by OFAC.


Who Is IDCZ And How Does It Affect Zimbabweans.


IDCZ was one of the Zimbabwean government’s most profitable strategic industrial holding companies that was self-sustaining since independence until sanctions. With the divestment drive that took place in Zimbabwe after 2001 sanctions, the IDCZ moved in to save national industries by buying shares in strategic companies that produce strategic products like fertilizers and acids [ZFC and Zimphos], water purification chemicals for our municipal water treatment plants [Chemplex Corperation], metal products [Copper Industries and Almin Metals], stone products [Stone Holdings], consumer products [Olivine Industries], motor manufacturing [Deven, Willowvale Motor Industries], glass [PG Glass], chemicals for industry, mining and animal husbandry.


• By the United States imposing sanctions directly on such a strategic industrial funder, they pierced the heart of Zimbabwe’s high employment manufacturing sector to deprive the country of jobs, taxes, clean water, fertilizer, aluminum, metals, copper, consumer products, motor manufacturing and glass manufacturing.


• As a result of these sanctions, over the years IDCZ has had to liquidate or sell stakes in Almin Metal, Stone Holding, PG Glass and Zimbabwe Copper Industries, leaving those companies and industries dead and thousands unemployed. It also crippled the parastatal sector that contributes 14% of our national gdp and over 15% of our employment. GDP losses from the sanctions are estimated at about $26.6bil on a proportional parity comparison with Zambia, as Zimbabwe’s economy was twice the size of Zambia when sanctions were imposed in 2001.


Banks


• 2017 CBZ was charged US$3.8bil, later negotiated down to US$385mil for undertaking 15127 transactions for mainly ZBBank which was the biggest lender to small scale farmers after #AgriBank.


• 2016 Standard Chartered was slapped with an US$18mil fine for undertaking 1795 transactions for companies with more than 50% shareholding held by Special Designated Nationals. Most of these companies would be parastatals.


Targeting Agriculture.


• To target the heart of the Zimbabwean economy, agriculture, which contributes 17% of the national gdp and a major employer. They imposed sanctions on AgriBank, ZB Bank, Scotfin and Intermarket Holdings in 2008.



• By imposing sanctions on four very critical financial institutions, the US was aiming to cripple land reform and as a result over 300 000 small scale farmers were left without funding to farm, finance and insure drought relief and irrigation programs to mitigate climate change.


• Since 2008, AgriBank lost credit lines in excess of $98mil and corresponding international bank relationships.


ZB Bank And InterMarket Holdings.


• Both ZB Bank and InterMarket Holdings fall under ZB Financial Holdings and are instrumental in giving business loans, mortgages, project finance, commercial loans, insurance and small unsecured loans to small scale businesses and farmers.


• As illustrated above, CBZ faced a fine of $3.8bil which was later negotiated down to $385mil for processing ZB Bank payments. This handicapped a lot of housing development, business set up, industrial development and farming financing.


IDBZ


• Sanctions were also imposed on the Infrastructure Development Bank of Zimbabwe to stop it from fulfilling its mandate of building and maintaining electricity, road, rail, water, sanitation and telecommunications infrastructure, hence Zimbabwe’s infrastructure is dilapidating and in need of US$24bil to upgrade.


SMSDCO


• Small and Medium Scale Development Corperation which is not even on the so-called list had $US3mil confiscated by OFAC, prejudicing the funding of small and medium scale youth enterprise in Zimbabwe.


• As a result of these coercive measures on our banks and development institutions, more than 102 international correspondent banks have cut ties with Zimbabwe, including some Chinese and South African banks, as they derisk their relationships to comply with ever more stringent US sanctions, international anti terrorism and money laundering standards.


• And even though between 2014 and now, Agribank, ZB Bank, IDCZ and IBDC are said to have been delisted from executive order lists. ZDERA still prohibits any multi-lateral institutions from lending the government of Zimbabwe or its institutions money. Furthermore, as stated above, the IEEPA is separate to the executive orders so it still restricts any transactions with the government of Zimbabwe (in many ways Zimbabwe as a whole) without license from the US President and the above companies are wholly or majority owned by this government that was identified as a threat to the United States.


• As a result there is still significant sanction risk associated with doing business with these entities, especially after fines were imposed on CBZ and Standard Bank in 2017 and 2016 respectively for doing business with them. As a result, many financial institutions have derisked by cutting loans or corresponding relationships with these financial institutions to avoid penalties. This suggests that these institutions are still very much under sanctions. The impact of these banking sanctions has been the nation losing in excess of $34bil in loans and aid over the last 19yrs.


• The same sanctions also impact a plethora of parastatals that are instrumental in industrial production, exporting our resources and protecting the sovereignty of the nation. These include MMCZ, ZMDC, ZISCO, Zimbabwe Mining Development Corperation and Zimbabwe Defense Industries among others.


• ZISCO was a major employer, employing over 5000 people at its peak and producer of raw material for industry. It was also a major a driver of the economy and down stream industries in which it created 50 000 jobs indirectly, according to the Economist, but since the apartheid era destabilization and US sanctions, it’s now just a shadow of its former self, handicapping the entire Zimbabwean economy.


All this has had a significant multiplier and ripple effect on our economy which has lost the nation over 50 000 jobs, a potential loss of between US$30mil and US$150mil/yr or US$2,8bil over 19yrs from just this one institution.


Social Development.


• In 2002 the European Union cut €132mil/yr in aid to Zimbabwe, affecting social development and humanitarian aid for fighting HIV, climate change, water challenges and droughts. Bare in mind that aid was a pledge in lieu of the west paying reparations in Africa for colonization.


• Recently the British DFID cancelled its Trade Mark Southern Africa funding for a project to eliminate fruit flies in SADC after Zimbabwe benefited from some of the funds.


• Zimbabwean politicians can not attend many EU COMESA and SADC meetings because of sanctions and so Zimbabwe is left out in many of the regional agreements signed there, impacting regional integration.


• In total Zimbabwe has lost in excess of US$4.5bil in donor aid since 2001.


Private Sector.


• November 2013, Econet Wireless complained about its operations being hampered by a toxic economic environment.


• Many private companies can not operate because they don’t have access to inputs and loans so they are forced to finance their business with cash or high interest loans from second tier lenders, hindering reinvestment growth and the capacity of these institutions to grow.


• Due to prohibitions of investments, loans, machinery and technology sales, payment clearances by financial institutions and a lack of corresponding banking relationships, it’s difficult for companies in Zimbabwe to retool and upgrade technology to compete regionally. The result is South African businesses that are well funded, equipped with modern technology and beneficiaries of the apartheid era destabilization of Zimbabwe, monopolize the market.


• The few blue chip companies like Delta, Econet and Innscor that have access to very influential US funders like BlackRock, Vanguard and South African funds have become the monopolies that are sabotaging the Zimbabwean economy for the benefit of their US funders and former apartheid SA companies.


• All these restrictions affect the critical function of the country, impacting balance of payment, investment, loans, job creation, asset utilization, production of exports, raising foreign currency and tax generation, which affects the capacity of both government, private and non-profit sectors to deliver services to 17mil people.


Preferential Procurement Collapse


• Since the imposition of sanctions on Zimbabwe, preferential procurement agreements for Zimbabwean products in the common wealth, EU and the US were cancelled. The government lost its right to buy fuel directly from the Middle East as using the US dollar as payments would be blocked, while shipping conferences carrying fuel for Zimbabwe under a government manifest risk being confiscated or sanctioned. This has an impact on the entire Zimbabwean economy and all Zimbabweans.


End of Part 1