Michael Tome Business Journalist
The Reserve Bank Zimbabwe (RBZ) says the perception of Zimbabwe as a high-risk jurisdiction, due to illegal Western economic sanctions, continues to stifle the country’s commercial and industrial performance, hampering the flow of payments from the outside the country.
Zimbabwe continues to reel under the weight of sanctions imposed by Western countries, particularly Britain and the United States, at the turn of the century.
Local financial services firms at suboptimal levels due to barriers induced by the Zimbabwe Democracy and Economic Recovery Act (ZIDERA) of 2001 and the United States Office of Foreign Assets Control, which limits the movement of money held by corporations under the illegal regime of the United States. punishments.
OFAC regulations have made many international banks reluctant to do business with Zimbabwe, while some have cut ties altogether.
Several African countries, including Senegal, Kenya, South Africa and Namibia, as well as captains of industry and commerce, have called unequivocally for the lifting of the economic embargo, citing its negative effect on the business viability and the wider Zimbabwean economy.
The sanctions-induced economic slump has inflicted myriad damage on Zimbabwe’s economy, shutting down many industries and losing many people’s jobs.
Speaking at the just-concluded ZimTrade Exporters Conference, Reserve Bank of Zimbabwe (RBZ) Director (Exchange Control), Farai Masendu, said that due diligence on customers (CDD) and know your customer (KYC) applied to most transactions with Zimbabwe were hurting the competitiveness of local industries.
“It is important to note that as a country we have risen to the challenge of risk reduction, most of our banks have lost correspondence banking relationships, if you make a payment it goes through a long process of Consideration because of the risk factor that is attached to Zimbabwe is what jeopardizes our business dealings.
“The intention is not to delay payments, but because of the challenges we face due to the loss of correspondent bank accounts, the reduction of risk and the scrutiny to which our transactions are exposed”, Mr. Masendu said.
According to the RBZ, at least 102 correspondent banking relationships have been lost over the past decade due to the country’s alleged high-risk status due to sanctions.
Economist Dr Langton Mabhanga says the sanctions have been an active stimulus to the existing economic difficulties facing the local economy.
“Sanctions have been the most corrosive agent for the deindustrialisation of Zimbabwe, they have been crafted in a way that is meant to shut down any opportunity for funding that could support the industry from international financiers,” Dr Mabhanga said. .
Lately, however, there have been growing calls from their regional counterparts for the lifting of punitive economic sanctions, given the devastating effect they have had on Zimbabwe.
Alena Douhan, the UN special rapporteur on unilateral coercive measures, advocated for the lifting of sanctions after visiting Zimbabwe to assess the impact of sanctions in October last year.
In 2019, Standard Chartered Bank was ordered to pay a US$18 million fine by the Office of Foreign Assets Control (OFAC) to the US government for violating the Zimbabwe Sanctions Regulations (ZSR) by processing transactions for public companies and sanctioned persons of close value. at 77 million US dollars.
Most recently, Germany-based DEUTSCHE Bank reportedly cut its correspondent banking ties with Stanbic Bank, one of the few remaining international banking providers operating in Zimbabwe, causing a major setback for the institution and its wider clientele. .
To avoid antagonizing the US Treasury, in 2016 Standard Chartered ordered the Industrial Development Corporation (IDC) to close its accounts with the bank.
Barclays (now First Capital) has been ordered to pay a $2.5m settlement to the US Treasury after processing $3.4m in transactions from IDC (and its subsidiaries) dollars between 2008 and 2013.
In 2017, CBZ took a beating from OFAC after trading on behalf of sanctioned ZB bank, imposing a $385 million fine.