THE Reserve Bank Zimbabwe (RBZ) says the perception of Zimbabwe as a high-risk jurisdiction, due to the illegal western economic sanctions, continues to suffocate the country’s trade and industrial performance, hindering the flow of payments from outside the country.
Zimbabwe continues to reel under the brunt of sanctions imposed by western countries, especially Britain and the USA, at the turn of the century.
Local financial service companies at sub-optimal 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 restricts the movement of money owned by firms under the United States illegal sanctions.
OFAC regulations have made many international banks hesitant to deal with Zimbabwe while some have cut off ties completely.
Several African countries including Senegal, Kenya, South Africa and Namibia as well as captains of Industry and commerce have been unequivocal in calling for the removal of the economic embargo, citing their negative effect on the viability of businesses and the wider Zimbabwean economy.
The sanction-induced economic morass has inflicted a myriad of damage on Zimbabwe’s economy, resulting in many industries closing and many people losing jobs.
Speaking at the just-ended ZimTrade Exporters Conference, Reserve Bank of Zimbabwe (RBZ) director (Exchange Control), Farai Masendu, said the stringent customer due diligence (CDD) and know your customer (KYC) applied to most transactions with Zimbabwe’ were hampering the competitiveness of local industries.
“It is important to note that as a country we have faced the challenge of de-risking, most of our banks have lost out on correspondence banking relationships, if you make payment it goes through a lengthy process of scrutiny because of the risk factor that is attached to Zimbabwe, that is what is compromising our trade transactions.
“The intention is not to delay payments but because of challenges that we are facing because of loss of correspondence banking accounts, the issue of de-risking, and the scrutiny that our transactions are exposed to,” said Mr Masendu.
According to the RBZ, at least 102 correspondent banking relationships have been lost over the last decade due to the country’s alleged high-risk status due to sanctions.
Economist, Dr Langton Mabhanga says sanctions have been an active stimulant to the existent economic woes confronting the local economy.
“Sanctions have been the most corrosive agent to Zimbabwean de-industrialisation, they were designed in a manner that is supposed to close any chance of financing that could support the industry from international financiers,” said Dr Mabhanga.
Lately, there have, however, been growing calls from regional counterparts for the lifting of the punitive economic sanctions, given the distressing effect they have had on Zimbabwe.
Alena Douhan, the United Nations special rapporteur on unilateral coercive measures, advocated for the lifting of the sanctions after her visit to Zimbabwe to assess the impact of the sanctions in October last year.
In 2019 Standard Chartered Bank was instructed to pay a fine of US$18 million by the Office of Foreign Assets Control (OFAC) to the US government for violating Zimbabwe Sanctions Regulations (ZSR) by handling transactions for state-owned firms and sanctioned individuals worth close to US$77 million.
Just recently German-based DEUTSCHE Bank reportedly curtailed its correspondent banking ties with Stanbic Bank, one of the few remaining international banking providers operating in Zimbabwe triggering a major setback to the institution and its clientele at large.
To avoid upsetting the US Treasury, in 2016 Standard Chartered Instructed Industrial Development Corporation (IDC) to close its accounts with the bank.
Barclays (now First Capital) was instructed to pay a US$2,5 million settlement to the US Treasury after handling IDC (and its subsidiaries) transactions worth US$3,4 million between 2008 and 2013.
In 2017 CBZ was given a tough run by OFAC after it carried out transactions on behalf of sanctioned ZB bank, imposing a penalty of US$385 million. – The Herald
