President Mugabe and Justice Minister Chinamasa are right, Zimbabwe does not need donors to fund the upcoming elections. In fact, Zimbabwe should not need ANY financial aid whatsoever.
Much was made of Minister Tendai Biti’s statement in April 2013 that South Africa was about to release Balance of Payments (BOP) support for Zimbabwe to the tune of $100 million, as we all now know, this only succeeded in embarrassing his opposite number Pravin Ghordan and both governments. Following the ensuing media storm, no money came and the country continues to live from hand to mouth. Months later not only does Zimbabwe still not have BOP support but the government has also spurned election support from the United Nations and the politicians are again haggling over election dates causing much anxiety in the country and the Southern African region. In all of this the question of how these elections are to be funded has not been answered and every time a solution seems to have been found it slips from the nation’s collective grasp. But is aid really the only option?
It is common cause that since independence in 1980 Zimbabwe has suffered undocumented capital flight running into potentially billions of Us dollars. In 2004 this practice came to be known as externalization and examples of this include:
- Transfer pricing in the 1980s and 1990s whereby manufacturers exported goods cheaply then imported the same goods back into Zimbabwe at hugely inflated prices.
- Under-pricing of exports only to sell them at their proper price once off-shore and the bulk of the money kept out of Zimbabwe.
- Blatant smuggling of precious and unprocessed minerals to avoid declaring them as exports thereby not remitting the subsequent proceeds.
- Banking malpractice that peaked in 2003 but continues unabated today including but not limited to manipulation of exchange control regulations.
Under Reserve Bank Governor Leonard Tsumba, 1993-2003, the country began to see the effects of externalization, this peaked in 2000-2003 with the liberalisation of the financial services sector, particularly banking, typified by the rapid unchecked growth of indigenous players. Upon his retirement Dr. Tsumba was replaced temporarily by Charles Chikaura in an acting capacity until the appointment of Dr. Gideon Gono in late 2003. On his appointment by President Mugabe Dr. Gono promised to clean up the financial sector which by then was widely perceived as the catalyst of Zimbabwe’s economic downturn. Dr. Gono’s initiative led to five years of sensational arrests, escapes, international chases, court cases, asset seizures and more with the list of suspects including many of the country’s business leaders at the time. Some of the accused even chose self-imposed exile to escape prosecution leading to failed requests for extradition by the RBZ through the police’s Serious Economic Offences Unit. By 2008 though the whole exercise had fizzled out into nothingness amid presidential pardons and the pressure of legal challenges on constitutional grounds. Though some of the cases are still ongoing, little of the plundered wealth has been recovered.
The dollarization of the Zimbabwean economy that followed the signing of the Global Political Agreement (GPA) in late 2008 was the catalyst for the recovery of the economy and this was strengthened by promises of financial support from all SADC nations in 2009. Despite much fanfare and a number of false starts, nothing of substance has been forthcoming and Zimbabwe’s recovery has been predominantly domestically driven and has predictably, stalled.
Illicit Capital Flight In Perspective
Considering that it is reasonably suspected that there are hundreds of millions possibly billions of dollars that have been siphoned out of Zimbabwe sitting in foreign bank accounts, the mind boggles that the Ministry of Finance is not actively engaging foreign governments and banks to institute legal proceedings against the account holders in an attempt to recover these funds. Only in 2013 did a bill go before parliament with the express purpose of tackling externalization. The Microfinance Bill is yet to be signed into law but only seeks to attach assets domiciled in Zimbabwe. It is unclear how far back the act can be enforced once signed into law thought the RBZ and the Ministry of Finance have said that as at February 2013 exporters had not repatriated $360 million. As at today it is unclear what measures either institution has taken to ensure the repatriation of these funds. In 2008 the Political Economy Research Institute at the University of Massachusetts Amherst published a report on capital flight from forty sub-Saharan Africa in the period 1970-2004 by Zimbabwe is estimated to have lost $16 162 000 000,00. For the full report go to http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_151-200/WP166.pdf.
New International Best Practice
Recently the Lybian Transitional Authority has made global headlines in its attempts to recover tens billions of dollars funnelled out of the country by the previous administration. Particular emphasis has been on South Africa which has acknowledged the existence of such investments and indicated its willingness to repatriate the funds despite their scale not having been finalised. In Zimbabwe it is unclear if the Microfinance Bill will make provision for such action by the Ministry of Finance and if so, how the Ministry will be capacitated as it is yet to be signed into law. If the government were serious about recovering externalised funds they would have speedily enacted this Bill in 2009 and by now the nation would surely have seen results. It is an indictment on the government and the finance ministry in particular that it is not known how much the country is losing annually to externalization and no effective measures have been instituted to recover what has already left or to stop the bleeding. Kofi Anan and the president of the African Development Bank Donald Kaberuka have both come out strongly against capital flight from Africa fuelled by corruption and fraud. With institutions like the AfDB willing to assist in recovering illicit capital transfers to their rightful states and the precedent set by South Africa in the Lybian case, what is Minister Biti waiting for?