South Africa is planning to extend short-term credit to Zimbabwe and also to help it write off its US$7.4-billion external debt, to prevent its neighbour spiralling out of control. Critics say this will be a waste of money unless it can pressure Zanu-PF to make political reforms.
Finance Minister Tito Mboweni disclosed the plan in an interview with Daily Maverick as Zimbabwe slipped closer to the brink after a massive fuel price hike on January 12 sparked a general strike and then widespread street protests, many of which were violently suppressed by state security forces.
However, some critics believe that South Africa is just tinkering with the Zimbabwean crisis and that any money that it channels to Zimbabwe will be wasted unless it persuades the ruling Zanu-PF to make fundamental political and economic reforms.
“It’s an act of self-delusion if you think you can avoid talking politics as you engage Zimbabwe, as in many other places,” Piers Pigou, senior consultant to the International Crisis Group said in response to Mboweni’s disclosure.
Harare is clearly desperate for a bailout from South Africa and/or any of its other allies to resolve an economic crisis which is slipping out of control.
Director-general of the SA National Treasury Dondo Mogajane told Sunday Times that South Africa had declined a request for a bailout of $1.2 billion which the Zimbabwe government had made to the South African government on December 26.
Mboweni did not mention specific numbers but told Daily Maverick the two governments were still discussing how to work together to settle Zimbabwe’s debt to the IMF, World Bank and the Paris Club.
According to Zimbabwean finance minister Mthuli Ncube, quoted by Bloomberg in October, Zimbabwe has a total national debt of $16.9-billion, of which its external debt is $7.4-billion, with $5.6-billion in arrears.
He told Bloomberg Zimbabwe owed $1.3-billion to the World Bank, $680-million to the African Development Bank, $308-million to the European Investment Bank and $2.8-billion to the Paris Club (to individual countries).
Mboweni said South Africa and Zimbabwe were also discussing the possibility of South Africa extending an existing credit facility of just short of R100-million which Zimbabwe had with the SA Reserve Bank. Mboweni said Zimbabwe had provided collateral for this loan in the form of its holding of SA Land Bank bills. The extension of this facility depended on Zimbabwe being able to provide further collateral.
Mboweni insisted that Zimbabwe had always repaid its loans under this facility in the past.
He said SA was also discussing ways of helping Zimbabwe lift its debt to international creditors. Without mentioning a specific figure, Mboweni said this debt “is not a lot of money” and that he was sure Zimbabwe was looking not only to South Africa but to “other friends and institutions” to help it write off the debt. Zimbabwean President Emmerson Mnangagwa has been in Russia, Belarus, Kazakhstan and Azerbaijan, supposedly seeking financial help from these old allies to rescue the crashing economy.
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