The publication of a US congressional bill to guide foreign policy on September 11th has offered hope to Zimbabweans that the draconian ZDERA (the Zimbabwe Democracy and Economic Recovery Act, 2001) legislation may be repealed. This could see the end of one of the last formal sanctions on Zimbabwe, offering hope of a greater rapprochement with Western powers. Can this lead the way to debt and arrears clearance and new flows of much-needed international financing?
Over the last few years, the formal sanctions by the US, EU and UK on individuals and companies have been withdrawn or reduced, although a few individuals remain under global financial sanctions due to accusations of corruption. There was a growing sense among the diplomatic community that such sanctions had little effect on the Zimbabwean regime. Indeed, they were used to galvanise support for the ruling party who were able to rail against the ‘imperial powers’ at election time.
Even though formal sanctions were limited, the chilling effect of poor diplomatic relations on international investment and finance flows, both private and through the international banks, has had a devastating impact on the Zimbabwean economy over a quarter of a century. In a recent interview economist Prof Gift Mugano, highlighted the impacts of sanctions, with investment flows dropping from 25% of GDP to 1% after 2001, and risk premiums increasing dramatically, putting off many. The so-called ‘look east’ policies have compensated to some degree, but China was never going to provide the sort of finance that could be sought elsewhere, and most support was closely tied to minerals and infrastructure investment deals.
ZDERA was signed into law in 2001 as a direct result of the land reform. It was different to other sanctions, as it could only be reversed through changes in the law, hence the need for this bill. In 2021, the US Embassy in Zimbabwe celebrated ZDERA’s 10th anniversary, restating the array of measures. Most notable was the requirement that the US was obliged by law to avoid engaging with the International Finance Institutions on financing, debt and arrears restructuring and so on. A whole host of conditions were attached, mostly focused on governance reforms.
That ZDERA was peculiar and not applied to other countries with perhaps even more dubious track records has often been pointed out. But that’s not the point, the lobby groups within the US who vociferously backed the opposition against ZANU-PF and rejected the land reform were very powerful, both within and outside Congress.
Changing political winds
So why the changes now? There is a growing consensus that the sanctions have had no effect on the government and imposed hardship on the people, squeezing the economy. In the absence of an organised opposition, prospects for change are most likely to come through reengagement, with some faction or other of the ruling party potentially pushing for change. And such reengagement may be most likely when there are resources flowing with prospects of improvements in living standards. Conditionality will not disappear of course, and financial sanctions will remain on individuals governed by laws on corruption internationally, but at least dialogue can be re-established.
The other thing that has changed in diplomatic missions, including the UK, US and EU, is a shift away from ‘aid’ towards ‘commerce’. The new congressional bill is sponsored by Brian Mast, a Florida Republican and chair of the House Foreign Affairs Committee. It is a wide-ranging bill aiming to recast the US’s relationships globally, focusing in particular on ‘American interests’, and avoiding what he terms left-wing interference with diplomatic positions. It has a section on ‘commercial diplomacy’ and the need to establish business and trade ties with Africa, and mention of Zimbabwe and ZDERA is hidden away on page 54, part of a wider effort to regear US international engagement under President Trump.
Meanwhile the European Union’s Global Gateway strategy aims to secure partnerships in a range of sectors, including energy, through supporting European business engagement in Africa and elsewhere. Similarly, the UK government is developing a new ‘critical minerals strategy’ and the Foreign Commonwealth and Development Office (FCDO) is facilitating commercial deals in line with national geopolitical interests. The race for critical minerals is on, and the West are many years behind the Chinese, especially in Zimbabwe.
The calculation is clearly that Western countries need to catch up, and to do so will require leveraging resources. This is not the soft diplomacy of aid programmes and nice projects involving NGOs, and support for health, education and agriculture programmes. This is the hard-nosed commercial reality, with access to critical mineral resources being top of the agenda. No different to China of course, but different to the past ‘aid’ era for sure.
Strings attached: a link to the compensation of white farmers
Further US funding following the removal of ZDERA is of course not without strings attached, as discussed in a recent ‘Friday drinks’ TV show. The sanctions regimes by the West were established following the land reform in 2000 in reaction to the expropriation of land from white farmers. Thus, in section 303b, the bill states that only if the full compensation to white farmers – as agreed in the Global Compensation Deed signed in July 2020 – is committed to within 12 months will US support for a deal with the International Financial Institutions continue. According to the bill, such future compensation payments in turn must be in in US dollars and not treasury bonds, no doubt the result of some successful lobbying in Washington DC by a faction of the white commercial farmers unhappy with the agreed terms of payment. Given that the agreed total amount is US$3.5 billion, this is a big deal.
The Zimbabwean government doesn’t have this sort of money of course, and paying commercial farmers at this level in cash within 12 months cannot be a priority. However, the government remains committed to compensation payments. US$3.1million has been paid in cash this year, with the first 378 farmers of the 740 who had their claims approved being paid in April. Around 1300 farmers accepted a deal of a 1% advance cash payment and then the remained of the agreed compensation amounts for farm improvements to be paid over 10 years in US denominated Treasury bonds. In addition, 94 BIPPA (Bilateral Investment Promotion and Protection Agreement) farm compensation deals have been approved, with US$20 million being paid out of a total of US$146 million. This is major progress, even if some former farmers are holding out for a better deal.
Many hoped that this would lead to a thawing of relations with the international community and a route to finalising a deal on debt and arrears. If ZDERA is repealed, there may be more pressure to come to an agreement with the debtors. However, a new debt and arrears restructuring approach must define how the $3.5 billion can be paid over time, and the new bill’s conditions will have to be changed in line with this, with the 12-month deadline for full cash payment clearly completely unrealistic.
Bargaining over conditions and timeframes
Many argue that, given the dire economic conditions in Zimbabwe, spending $3.5 billion on dispossessed white farmers even under a debt and arrears restructuring deal is a step too far. Many former farmers have left the country, and others have regeared their businesses in agriculture to make money upstream from production on the land, and few can be counted in the ranks of the poor. This is an extreme case of ‘reverse reparations’, some say, despite the constitutional requirement for compensation for improvements to land and the need for political expediency and rapprochement with the West.
Let’s hope that the bill is passed and, after nearly 25 years of sanctions, Zimbabwe is once again allowed to engage with the US and international financial institutions. I am sure that there will be bargaining over the conditions and timing and form of compensation payments. And the Zimbabwean government will equally have to be serious in its commitments to reforms as part of any bargain.
There are many urgent priorities that renewed international finance can provide funding for. The challenge of rebuilding the core infrastructure of Zimbabwe is huge, not least the sort of investments that must be part of a sustained agrarian reform. It has been a long time to wait and so many opportunities to benefit from the land reform have been missed through lack of post-redistribution investment.
This post was written by Ian Scoones and first appeared on Zimbabweland.