The U.S. President, Joe Biden, announced on Monday the 4th of March 2024 that he has signed an executive order to cancel the economic and other sanctions imposed on Zimbabwe by his predecessors since 2001.
The move can be seen as a gesture of goodwill and a recognition of the progress made by the Zimbabwean government in implementing political and economic reforms. But are we seeing all there is to this decision? American benevolence? Are they saying the reasons the sanctions were imposed are now gone?
Then there is the small matter of that this decision comes with a caveat:
Zimbabwe cannot pursue any claims for reparations or compensation for the damages caused by the two decades old sanctions, and also that the U.S. will continue to sanction individuals and entities “involved in human rights abuses, corruption, or undermining democracy in Zimbabwe.”
Moreover, the U.S. Congress has not repealed the Zimbabwe Democracy and Economic Recovery Act (ZDERA), which restricts U.S. support for multilateral financing to Zimbabwe. The question is: what are the implications of this mixed signal for Zimbabwe and the region?
THE HISTORY OF THE SANCTIONS
The U.S. sanctions on Zimbabwe were imposed in response to the alleged violations of human rights, democracy, and the rule of law by the former president Robert Mugabe and his ruling party, ZANU-PF. The sanctions targeted individuals, entities, and sectors that were deemed to be supporting or benefiting from the Mugabe regime, such as the security forces, the mining industry, and the state-owned enterprises.
The sanctions however went further and prohibited not only U.S. persons, biological, legal or otherwise, from engaging in transactions with Zimbabwe or providing any assistance to the country, but also all persons, who do, or intended to do, business with or in Amerca, except for humanitarian purposes. Any who did actually faced criminal prosecution.
Considering that America is at the centre of most global transactions via exchanges, Society for Worldwide Interbank Financial Telecommunications (SWIFT) payments, and the rest of capital markets, this implied that Zimbabwe was economically amputated off of much needed partnership growth through investments, foreign direct investment (FDI) and multi-latetal lending to name but a few.
The sanctions were imposed through the following instruments:
ZDERA: The Zimbabwe Democracy and Economic Recovery Act was enacted by the U.S. Congress in 2001 and amended in 2018. It authorises the U.S. President to impose sanctions on Zimbabwe and to use the U.S. influence and vote in the international financial institutions, such as the World Bank, the International Monetary Fund, and the likes of African Development Bank, to block any assistance or debt relief to Zimbabwe until certain conditions are met.
These conditions included the “restoration of the rule of law, the respect for human rights, the implementation of electoral reforms, the establishment of an independent judiciary, the protection of property rights, and the accountability for past atrocities.”
ZIDERA can only be repealed or modified through the legislative process within the United States. As the president, Joe Biden, does not have the power to unilaterally remove ZIDERA by himself, the repeal will require an act of American Congress (which incorporates their House of Representatives and the Senate), BOTH passing passing a bill to repeal or amend the law.
Executive Orders
These are directly within the ambit of the American president’s power and in so far as Zimbabwean sanctions are concerned, have been effected as follows;
EO 13288: The Executive Order 13288 was issued by the U.S. President George W. Bush in 2003 and amended by subsequent presidents. It declared a national emergency with respect to the actions and policies of certain members of the Government of Zimbabwe and other persons to undermine Zimbabwe's democratic processes or institutions.
It then imposed travel bans, asset freezes, and transaction prohibitions on the listed persons and their associates. It also authorised the U.S. Secretary of the Treasury, in consultation with the U.S. Secretary of State, to designate additional persons “who are responsible for, or have participated in, human rights abuses, political violence, corruption, or actions that threaten the peace, security, or stability of Zimbabwe.”
EO 13391: The Executive Order 13391 was again issued by the U.S. President George W. Bush in 2005 and, it too, was later amended by subsequent presidents. It expanded the scope of the sanctions imposed by EO 13288 to include “entities owned or controlled by, or acting or purporting to act for or on behalf of, the persons designated under EO 13288.”
It went further to authorise the U.S. Secretary of the Treasury, in consultation with the U.S. Secretary of State, to designate additional entities that have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, the persons designated under EO 13288 or EO 13391.
EO 13469: The Executive Order 13469 was was the last issued by the U.S. President George W. Bush in 2008 and, like the others, was amended as well by subsequent presidents. It further expands the scope of the sanctions imposed by EO 13288 and EO 13391 to include the Government of Zimbabwe and the Reserve Bank of Zimbabwe.
ZDERA AND EXECUTIVE ORDERS DIFFERENCE
The difference between the executive order imposed sanctions and the ZDERA is as follows:
The source and scope of the sanctions:
The executive order imposed sanctions are issued by the U.S. President, under the authority of the International Emergency Economic Powers Act (IEEPA), which grants the President the power to declare a national emergency and to impose sanctions on any foreign country or person that poses an unusual and extraordinary threat to the U.S. national security, foreign policy, or economy.
The ZDERA, on the other hand, is enacted by the U.S. Congress, under the authority of the Foreign Assistance Act of 1961, which authorises the U.S. to provide or prevent foreign assistance and to support or bar multilateral financing to foreign countries. The ZDERA is comprehensive and all encompassing as it applies to the entire country of Zimbabwe, and to the assistance and financing that the U.S. and the international financial institutions can provide to Zimbabwe.
The content and objective of the sanctions:
The executive order imposed sanctions were punitive and coercive, as they aimed to punish and pressure the sited persons. They were reactive and responsive, as they could be, and were indeed, adjusted and amended according to changes and developments in the situation and behaviour of these persons and entities.
ZDERA, meanwhile, is conditional and incentive-based. So it can be suspended and terminated according to the prementioned compliances and fulfilments of the conditions and benchmarks that were set by the U.S. Congress when it promulgated the law.
Different impact and outcome:
The executive order imposed sanctions had a direct and immediate impact and outcome on the persons and entities that were subject to the sanctions, as they affected their assets, interests, and activities that are in the U.S. or in the possession or control of U.S. persons, which is significant considering the control that the U.S. have directly and via its citizens, of a significant portion of the finance world.
The orders had an indirect and spillover impact and outcome on the Zimbabwean economy and society, as they deterred and discouraged foreign investment and trade in the country, and as they isolated and marginalise the country from the international community and the regional integration processes.
The ZDERA, on the other hand, has an indirect and long-term impact and outcome on the Zimbabwean government and the public sector, as it affects their access and eligibility to the international financial assistance, debt relief, and development cooperation. The ZDERA has a direct and spillover impact and outcome on the Zimbabwean economy and society, as it limits and constrains the resources and expertise that are needed for the country's recovery and development.
When analysing the differences, in light of the repeal of one form of sanction in the continued subsistence of another, one can draw their own conclusions as to effect of this action.
QUID PRO QUO CLAUSE
The U.S. decision to lift the executive order sanctions on Zimbabwe come with a quid pro quo.
Zimbabwe cannot pursue any claims for reparations or compensation for the damages caused by the sanctions, and the U.S. will continue to sanction individuals and entities involved in human rights abuses, corruption, or undermining democracy in Zimbabwe.
I quote it verbatim;
"Nothing in this order shall be construed to create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person, nor to create any right of action or claim for damages against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person, arising from the imposition, modification, or termination of the sanctions set employees, or agents, or any other person, arising from the imposition, modification, or termination of the sanctions set forth in this order."
This clause effectively denies Zimbabwe any legal recourse or remedy for the harm and loss that the U.S. sanctions have inflicted on the country and its people. It also implies that the U.S. sanctions were illegal in the first place, as they were imposed unilaterally without the approval or authorisation of the United Nations, and by such a vital and influential state as the U.S., which has vast control and dominance over the global financial system. We wait to see how Zimbabwe decides in terms of reparations.
Legitimacy of the sanctions
The legality and legitimacy of the U.S. sanctions on Zimbabwe have been contested and challenged by various actors and institutions, both within and outside the U.S.
For example, in 2019, A group of 16 African countries, led by the then Tanzania President Mr. John Magufuli, who also was the chairman of SADC, called on the U.S. to “immediately lift” sanctions imposed on Zimbabwe expressing that the policy was hurting the region.
Similarly, the United Nations, the African Union, and other regional and international organisations have, to this point, repeatedly condemned and rejected the U.S. sanctions on Zimbabwe, urging the U.S. to lift the sanctions and to support the recovery and development of the country and the region.
THE MAGNISKI INITIATIVE AND ITS PLACE IN ALL THIS
In siting the eleven people and the three entities for sanction, the American president invoked the Magnitsky initiative. This is a global human rights sanctions regime that the U.S. and other countries have adopted and implemented to target and punish the individuals and entities that are… “responsible for or involved in gross human rights violations and abuses around the world.”
The Magnitsky initiative is named after Sergei Magnitsky, a Russian lawyer and auditor who died in a Moscow prison in 2009 after exposing a massive tax fraud scheme involving high-ranking Russian officials and businessmen. His death sparked an international outcry and a campaign led by his former employer and colleague, Bill Browder, who lobbied the U.S. and other governments to impose sanctions on the perpetrators and their associates.
The U.S. eventually made this a precedent case for imposing sanctions on any foreign individuals and entities whom they designate as responsible for gross human rights violations and significant corruption anywhere in the world.
So, according to the U.S., this decision on the eleven + three is partly motivated and influenced by a desire and intention to shift and transition from the country-specific and comprehensive sanctions regime to the individual-targeted and selective sanctions regime under the Magnitsky initiative.
The U.S. believes and hopes that this move will enhance and improve the effectiveness and efficiency of its sanctions policy and practice, as well as its credibility and legitimacy in the eyes of the international community and the public opinion.
Or so they say.
An economy is always driven by key protagonists, being political and industry leaders, and ensuring this group is hamstrung economically will, for all intents and purposes, necessarily hamstring the economy they operate in, as well. Then again on the flip side of this coin, are those saying this is the group sucking the lifeblood out of the very Zimbabwe economy itself. Thus if they are constricted this way then the economy will actually benefit long term.
Time, as always, will vindicate the correct, and all will be revealed as to which camp is accurate.
In the meantime, these designations mean that these individuals and entities are subject to the U.S. sanctions, and that any property or interests in property of these individuals and entities that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to the U.S. Treasury Department. Moreover, any transactions or dealings by U.S. persons or within the U.S. involving any property or interests in property of these individuals and entities are prohibited.
IMPACT
Needless to say, the U.S. sanctions on Zimbabwe have had a significant (negative) impact on the country's economy and society. The sanctions have restricted Zimbabwe's access to international markets, capital, technology, and skills. They have deterred foreign investment, trade, and even tourism in the country which could be higher than in is given the well documented endowments the country in blessed with.
Just as substantial, these sanctions have contributed to the isolation and marginalisation of Zimbabwe from the international community and the regional integration processes. According to some estimates, the sanctions have cost Zimbabwe over US$100 billion in lost revenue, investment, and development opportunities over the past two decades. That is such a significant amount for a country that has a national budget under US$ 7 billion!
For avoidance of doubt it is imperative to pick a few specific economic predicaments that the sanctions have brought to Zimbabwe. These include:
- Reducing the foreign currency inflows and reserves, which are essential for importing goods and services, servicing external debt, and maintaining the exchange rate stability. The sanctions have affected the nostro accounts of the Zimbabwean banks, which are accounts held in foreign currency with correspondent banks abroad. The sanctions have made it difficult for the Zimbabwean banks to access and use their nostro accounts, resulting in liquidity shortages and delays in international payments.
- Isolating the Zimbabwean financial sector from the global financial system, which has limited the access to credit, investment, and trade finance. The sanctions have deterred or discouraged the international banks from dealing with the Zimbabwean banks, due to the fear of reputational risk or legal consequences. The sanctions have also increased the cost of borrowing and doing business for the Zimbabwean banks and their customers.
- Constraining the growth and diversification of the productive sectors, such as agriculture, mining, manufacturing, and tourism, which are the main sources of income, employment, and exports for Zimbabwe. The sanctions have hindered the access to markets, technology, skills, and inputs for these sectors, affecting their competitiveness and profitability. The sanctions have discouraged the foreign direct investment and the private sector development in these sectors.
- Worsening the poverty and inequality among the Zimbabwean population, especially the vulnerable groups, such as women, children, and rural communities. The sanctions have reduced the government revenue and expenditure, which has affected the provision and quality of public services, such as health, education, and social protection. As stated earlier, imagine how much an extra US$100 billion could do to such a troubled economy.
- As for the question of whether the sanctions have fuelled political polarisation and human rights violations in Zimbabwe, or they themselves have been imposed mainly as a direct response to political polarisation and human rights violations is a very hotly contested topic. One thing is for certain, the same political party is still in power and all other conditions stated at inceptions of these sanctions, like political and election reforms, have not been implemented. One wonders then what is motivating their seismic repeal!
Suffice to say that this discussion is taking a macroeconomic and geopolitical perspective of the matter, hence articulating the costs (economic, social, financial or otherwise) of these sanctions and showing the link between them and the poor performance of the Zimbabwean economy. And leaving the politics to politicians (read lawyers).
VERIFIABLE ECONOMIC AND SOCIAL IMPACT
GDP growth: The GDP growth of Zimbabwe has fluctuated between positive and negative values, with an average annual rate of -0.4% from 2001 to 2020. The GDP growth of Zimbabwe has also been lower than the average of the sub-Saharan Africa region, which has recorded an average annual rate of 4.4% over the same period. Admittedly in the past four years GDP growth in the economy has seen an upward trajectory, which have recorded an average annual rate of 5.8% which has seen a nominal GDP number north of US$35 billion.
GDP per capita: It is on GDP per capita where the Zimbabwean economy shown a considerable decrease and stagnation. In all fairness, this can not all be attributed to sanctions but also to poorly supported policies and in cases outright sketchy governance, corruption (institutional and individual) and mismanagement, political instability, external shocks, geopolitical events, and global capital markets volatility among others. Sanctions, however, have stunted the efficacy of the economy’s intervention response to these adverse events.
The GDP per capita of Zimbabwe has declined from $1,376 in 2001 to $1,271 in 2020, with a temporal peak of $1,846 in 2012 and a trough of $790 in 2008. The average of the sub-Saharan Africa region, which has increased from $1,036 in 2001 to $1,570 in 2020. The SADC countries’ has increased from $1,348 in 2001 to $2,057 in 2020.
INCREASE OF INDIVIDUALS TO BE PUT ON SANCTIONS
The U.S. decision to lift the sanctions on Zimbabwe is paradoxical, as it coincides with the simultaneous increase of individuals and entities being put on sanctions by the U.S. Office of Foreign Assets Control (OFAC).
On the same day that President Biden signed the executive order to cancel the sanctions on Zimbabwe, OFAC announced that it has designated the president of Zimbabwe and 10 other individuals, along with three entities, as specially designated nationals (SDNs) for their involvement in human rights abuses, corruption, or undermining democracy in Zimbabwe.
The full list includes the president of Zimbabwe, and the first lady Dr. Auxillia Mnangagwa, the deputy president of Zimbabwe, Dr. Constantino Chiwenga, Mr Kudakwashe Tagwirei and his wife Sandra Mpunga, their business partner in Fossil Contracting, Fossil Agro and Lafarge Cement, Mr. Obey Chimuka, Zimbabwe’s Minister of Defence Oppah Muchinguri, the Commissioner general of the Zimbabwe Republic Police Mr. Godwin Matanga, his deputy Steven Mutamba, Walter Tapfumaneyi, Deputy Director of the Zimbabwe Central Intelligence Organisation, the Minister of State Security Mr Owen Ncube, among others.
These designations mean that these persons and entities are subject to the U.S. sanctions, and that any property or interests in property, of these persons and entities that are in the U.S. or in the possession or control of U.S. persons or partners of U.S. linked persons or companies (austensibly about 80% of the western world via banking and transaction control), are blocked and must be reported to OFAC.
Moreover, any transactions or dealings by U.S. persons or within the U.S. involving any property or interests in property of these persons and entities are prohibited.
It is possible that the U.S. is trying to balance its interests and values, by rewarding the Zimbabwean government on one hand, while punishing the individuals and entities they deem as spoilers or violators of the U.S. principles and standards, on the other hand.
It is not misplaced to reckon that America is, in fact, fomenting disagreements within the Zimbabwe ruling party itself via a “divide and rule” approach, or is removing liability blame on the opposition who are widely taken as harbingers of the sanctions by advocating for them in the USA. Or both.
This, by extension, may mean the U.S. is trying to exert pressure and leverage on the Zimbabwean government, signalling its willingness to cooperate, while maintaining its ability to sanction and isolate undesirable elements.
As much as it a possibility that this is a continuation of the former sanctions by constricting those it views as the drivers of the Zimbabwe economy, and speed up the toppling of the current administration.
As alluded to above, when dealing with economic protagonists in any country, one may arrest growth by curtailing its political and business leaders. It is akin to America having sanctions imposed on its president and deputy, Central Intelligence Agency (CIA) and Federal Bureau of Investigations (FBI) chiefs, along with Elon Musk, Jeff Bezos, Larry Ellison, Warren Buffet, Michael Bloomberg, Steve Ballmer, Larry Page, Sergey Brin, and Mark Zuckerberg, all at the same time.
It is not completely misplaced, however, to consider that the U.S. is also trying to appease and accommodate the different factions and constituencies within the U.S. political system, by satisfying the demands and expectations of the executive and legislative branches, as well as the civil society and the diaspora groups.
Simultaneously it may as well be endeavouring to court African countries, the Southern African Development Community (SADC), the African Union (AU) and many other institutions, at such a time of conflagration in Ukraine, Israel and the charged environment with Russia and indeed China.
Regardless, either way, the U.S. is acting inconsistently and incoherently, by sending mixed and confusing signals to Zimbabwe and the region, and by undermining its own credibility and legitimacy. The impact and outcome of this incongruous move will depend on how the U.S. and Zimbabwe will interpret and respond to it, and how the situation will evolve and change in the coming days, weeks and months.
ZIMBABWE’S MITIGATION MEASURES
Despite the U.S. sanctions and the other challenges and constraints that Zimbabwe has faced, the country has managed to survive and even witness some growth and development in the past two decades, as alluded to above. The country has taken various mitigation measures to cope and adapt to the adverse and hostile environment.
Some of the mitigation measures that Zimbabwe has taken include:
Adopting a multi-currency system: In 2009, Zimbabwe abandoned its local currency, which had become worthless and unusable due to hyperinflation, and adopted a multi-currency system, which allowed the use of foreign currencies, such as the U.S. dollar, the South African rand, the Botswana pula, and the euro, as legal tender. This measure helped to restore macroeconomic stability, reduce inflation, increase confidence, and facilitate trade and transactions.
For now we will gloss over some challenges of this system, such as the shortage and volatility of foreign exchange, the loss of monetary policy autonomy, and the dependence on external factors. Leading to the reintroduced its local currency in 2009, in an attempt to regain monetary sovereignty and address the foreign exchange crisis. We shall explore this in another topic.
Re-engaging with the international financial institutions: In 2015, Zimbabwe embarked on a re-engagement process with the international financial institutions, such as the World Bank, the International Monetary Fund, and the African Development Bank, from which it had been estranged and indebted for over a decade.
This process aimed to clear the arrears, restore the relations, and access the resources and expertise of these institutions. In 2016, Zimbabwe cleared its arrears with the International Monetary Fund, and in 2019, it cleared its arrears with the African Development Bank. However, Zimbabwe still owes over $1.4 billion to the World Bank, and over $5.6 billion to other bilateral and multilateral creditors. And discussions are ongoing.
Diversifying its exports and partners: In 2019, Zimbabwe launched the National Export Strategy, which aims to increase and diversify its exports and partners, and to reduce its trade deficit and dependence on a few commodities and markets. The strategy focuses on promoting value addition, enhancing competitiveness, improving quality and standards, and facilitating market access and penetration. The strategy also identifies priority sectors and products, such as mining (particularly lithium and the platinum metals group), agriculture, manufacturing, tourism, and services, and priority markets and regions, such as the SADC, the COMESA, the EU, and the Middle East.
The strategy also seeks to leverage the opportunities and benefits of the regional and continental initiatives, such as the SADC Trade Protocol, the COMESA Free Trade Area, and the AfCFTA.
Leveraging its resources and geopolitics: Zimbabwe has also leveraged its natural and human resources, as well as its geopolitical position and relations, to survive and grow in the face of the U.S. sanctions and the other challenges. The country has abundant and diverse natural resources, such as minerals, land, wildlife, and forests, which provide the basis for its economic activities and potential.
The world's second-largest platinum reserves, the fifth-largest diamond reserves, and significant deposits of gold, coal, chrome, nickel, copper, and lithium are are found in the country. It also has fertile and arable land, which supports its agricultural sector, which accounts for about 15% of its GDP and 60% of its employment. Not to be belittled is the rich and varied wildlife and forests, which attract its tourism sector, which accounts for about 8% of its GDP and 10% of its employment. All these have been leveraged to cushion the impact of these sanctions.
From the geopolitical front, relationships were strengthened while new ones were forged for strategic partnerships and alliances with various regional and global actors, especially those that are opposed or alternative to the U.S. and the West. Zimbabwe has maintained and strengthened its ties with its neighbours and fellow members of the SADC and the AU, which have provided it with political and diplomatic support, as well as economic and security cooperation.
The relations with China, Russia, and other emerging economies, have been deepened, which have provided financial and technical assistance, as well as investment and trade opportunities, especially in agriculture and mining. Existing ones have been diversified with other countries and regions, such as India, Brazil, Turkey, Iran, and the Middle East, which have offered it new markets and sources of capital, technology, and skills.
CONCLUSION
The U.S. decision to lift the sanctions on Zimbabwe is a significant and historic event that has profound and far-reaching implications for Zimbabwe and the region, as well as for the U.S. and the world. It may be a recognition and appreciation of the efforts and achievements of the Zimbabwean government. It may be furthering of attrition escalated by other means. It may be shifting of geopolitical strategies. Indeed, it may be many other things. What is not under contest is that things are moving… it is the direction, for now, that we are still yet to determine with certainty.