The sanctions debate: myths, exaggeration and denial

ZDERA allows the US to veto any lending to Zimbabwe from multilateral financial institutions, such as the IMF, the World Bank or the African Development Bank. US representatives on these institutions are obliged to vote against any application by Zimbabwe for credit facilities, loan rescheduling and debt cancellations.

Bush added: “Section 4(c) of the Act purports to direct the executive branch to oppose and vote against the extension of loans or the cancellation of debt in international financial institutions unless and until I make a certification or national interest determination.”

Zimbabwe argues that these measures were responsible for the IMF turning down several pleas for financial support. However, the IMF had already withdrawn support in 1999 due to Zimbabwe’s failure to pay back debts. The IMF subsequently withdrew Zimbabwe’s voting rights in 2003.

In 2003, the US placed over a 100 individuals and entities under sanctions. It is this stage of measures that has provided the most controversy. The US insists that the measures only target 98 people and 68 entities, mostly owned by the sanctioned people.

The US renews the measures often, saying the Zimbabwe government is engaged in “actions and policies (that) continue to pose an unusual and extraordinary threat to the foreign policy of the United States.”

The regulations under this law means no American companies can do business with entities on the list. The US Treasury, through its Office of Foreign Assets Control (OFAC), seizes any money that passes through the US banking system to any of the sanctioned firms.

Companies that have been on the list include Agribank, the state owned farm lender, ZBC Financial Holdings, in which government has a 23.5% stake and NSSA a 38% shareholding.

The Industrial Development Corporation (IDC), a wholly owned state enterprise, is also on the list. IDC has interests in a wide range of Zimbabwean companies. Most notable among these are Olivine, Sable Chemicals, Chemplex and Zimbabwe Fertiliser Company.

It can be said that the IDC has taken the most direct hits of the US measures.

In 2013, IDC successfully sought a loan from the PTA Bank for Olivine. The $2 million was seized by OFAC. The money was to be used for plant rehabilitation and raw material imports.

In April this year, IDC CEO Mike Ndudzo said that the company had lost over $20 million to seizures by OFAC.

Zimbabwe Fertilizer Company, one of its subsidiaries, had $5 million frozen. In addition, the IDC had to contend with normally friendly lenders growing cold feet. IDC of South Africa had granted IDC an $18 million loan, but turned down a second tranche, afraid of falling foul of the US.

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