MUTARE– Southern Africa’s unsustainable debt burden is compounded by states which understate their obligations, with Zimbabwe’s official debt total stated to be double at US$35 billion, a new investigation reveals.
The new report The Southern Africa’s Debt Conundrum by the Open Initiative of Southern Africa (OSISA) emanated from investigative journalisms works also show that the Zimbabwe is in a debt distress.
The report provides an overview of the risks and challenges faced by the regional states as they seek a path to debt sustainability, in sub-Saharan Africa, 16 countries are classified as having either a high risk of debt distress or being in debt distress.
Selected countries referenced including Angola, Mozambique, Zambia and Zimbabwe, were studied based on the ‘fiscal solvency of their fragile economies and their vulnerability to a rising debt stock, as well as the wider impact on socio-economic development.’
The report also traced the role of corruption and mismanagement in a debt crisis that is spiraling out of control, with public debt in the region estimated at 57% of Gross Domestic Product (GDP) as at the end of 2018.
It states that as a result of this unsustainable burden African governments have failed to provide requisite delivery of social services, contributing to poverty and economic turmoil as a result, as governments have to secure resources from elsewhere to repay the debt.
“While the government (Zimbabwe) says the public and publicly guaranteed debt stood at US$17,69 billion as at November 2018, our probe estimates that a more realistic tally is around US$35 billion.
“The undeclared debt emanates from, among other sources, farm compensation, Chinese loans, Afreximbank borrowings and the growing burden of crumbling parastatals. The matter of undisclosed loans, particularly from China and former eastern bloc countries, has been consistently raised in the International Monetary Fund’s Article IV consultations with Zimbabwe.
“Between 2010 and 2018, the debt payments of developing countries increased by 85%, which sent alarm bells ringing,” states part of the report.
The reports warns ominously that Southern Africa, ‘a region endowed with vast natural resources, is now an intriguing theatre of the geopolitics of strategic minerals as China, the United States and Russia are now locked in a scramble for economic opportunities in this part of the world.’
OSISA recommends that regional governments improve on economic governance, through enhanced legislative oversight, stronger public finance management, and better deal-making frameworks for natural resource exploitation.
The reports also advises for formulation of alternative revenue mobilisation strategies, for example VAT or tax on electronic transactions or activities that undermine the environment as well as policies to guide public officials to act in the best interests of nations
On the recent controversial compensation of white farmers the reports state that government grossly understated this financial obligation at US$3.5 billion, when it could top over the US$10 billion mark.
“Our investigation reveals that, contrary to President Mnangagwa’s assertion that US$3 billion is needed to compensate the farmers for improvements, the amount is much higher, with CFU director Ben Gilpin putting it in the region of “at least US$10 billion”.
“Independent assessors have said this amount is accurate. In addition to the US$5, 6 billion for improvements, the farmers argue that they are also entitled to a further US$3,5 billion for the land itself. They want an additional US$900 million for “intangibles” such as trauma,” reads part of the report.
OSISA findings show that government is the biggest contributor because of unsustainable budgetary deficits and ‘ultimately, the resolution of Zimbabwe’s debt crisis will depend on the government’s willingness to implement genuine, far-reaching economic and political reforms.’
The report states that the biggest chunk of the national debt obligations are a result of high level corruption and bad governance, due to ‘the offloading of elitist debts onto the shoulders of taxpayers’ through schemes like the RBZ Debt Assumption law.
“Zimbabwe’s debt crisis is partly a product of illegalities by the executive arm of government, for example the violation of the RBZ Act (overdraft), lack of recourse to Parliament, and violation of the Public Debt Management Act. The debt crisis is an affront to democracy, for instance the US$700m Rhodesian debt (It would have ballooned to US$2 billion in 39 years).
“The government adopted the Reserve Bank of Zimbabwe debt of US$1, 35 billion in August 2015 through the Reserve Bank Debt Assumption Bill. This worsened the debt burden on the taxpayer. 4. The Resource Curse: governments should be cautious when borrowing on the basis of unrealistic mineral projections as they do not control international commodity prices,” states OSISA.
