Crippling debt, lack of transparency and endemic corruption are sadly all too familiar stories in southern Africa. But now, in a landmark court ruling, Zimbabwean citizens have successfully demanded accountability from their government.
For citizens seeking truthful disclosure about exactly how much debt the country is in, the ruling made in their favour on 1 December signals a big victory in the fight for transparency. However, it stands to be seen to what extent government will comply with the ruling.
The ruling comes at a time when government has been pushing for constitutional amendments that would make the executive unaccountable to legislature regarding all foreign debts. Such an amendment would be a big blow to the quest for transparency. The government stands accused of guaranteeing loans from pan-African multilateral lender, Afreximbank, and other financiers using national resources without disclosure about the terms of the deals.
Harare North legislator Allan Norman Markham and the Community Water Alliance Trust, a civil society organisation, took finance minister Mthuli Ncube, the central bank and Afreximbank to court in September last year over the issue of full disclosure of financial agreements made by government and external lenders.
In his litigation, Markham sought the nullification of a USD500 million loan facility from Afreximbank to back the Zimbabwe currency, because it had been awarded without parliamentary approval. Zimbabwe had reportedly offered platinum production as collateral for the loan, in a move that showed lack of transparency.
Headquartered in Cairo, Egypt, Afreximbank was established in 1993 by African and non-African private and institutional investors for the purpose of financing, promoting and expanding intra-African and extra-African trade. However, most transactions between the government and Afreximbank have been made without full disclosure, in violation of section 300 (3) of the Constitution.
Zimbabwe’s finance ministry permanent secretary, George Guvamatanga, admitted, in earlier opposing papers, that the USD500 million loan should have had parliamentary approval, but argued that cancelling such loan would be a breach of contract.
Zimbabwe’s high court ruling compels finance minister Mthuli Ncube to publish all loans and guarantees entered into by government from 1 January 2019 to 1 December 2020. The finance ministry is also expected to gazette all details of the Afreximbank loans by January 2021.
The court did not grant Markham’s application to nullify the USD500 million loan facility but ruled that the terms of the agreement be made public.
Citizens are increasingly demanding more transparency from the government over its debts. In another legal case, a Harare lawyer recently approached the High Court demanding public disclosure of how much exactly government owes internal and external creditors.
The lawyer, Abraham Mateta, argues that it is unlawful for the government of Zimbabwe to hide such information from taxpaying citizens.
“The challenges bemoaning this country as far as it relates to debt stem from the failure to abide by the laws that mandate transparency and accountability to the public in managing the country’s resources,” Mateta argued.
“The lack of publication by the first respondent (finance minister Mthuli Ncube) also means that I, as a citizen of Zimbabwe, am saddled by loans that I will need to repay of which I have no idea when and how they were incurred… over 70% of Zimbabwe’s known loan obligation is in interest.”
“The first respondent has failed to publish the information as directed by the constitution and I have every reason to believe that he will fail to do so again unless compelled to do so by a court,” said Mateta.
Although the matter is yet to be heard, it sets a precedent in terms of citizens holding their government to account. In an interview, Human Rights Watch Southern Africa’s director, Dewa Mavhinga, said Zimbabwe’s debt problem is just as much a human rights concern as it is an economic one.
“Corruption, poor public finance management, and debt assumption all contribute to undermining the government’s capacity to fund socio-economic rights, for example, the right to health, potable water and the right to food,” said Mavhinga.
About 8.6 million Zimbabweans are currently facing starvation and are dependent on food aid, yet the nation is having to divert important resources to address an economic burden arising from debt assumption.
The central bank bombshell
It was none too pleasing for citizens when news broke out in November that the central bank would soon offload its debts to taxpayers.
The bank plans to transfer several billions of the debt it holds to the Ministry of Finance and Economic Development after completing a debt consolidation exercise. The debt reportedly dates back two decades, related to post independence legacy debts, payment obligations for services to government and blocked funds.
This is not the first time. Between 2007 and 2008, the Reserve Bank of Zimbabwe designed a loan facility termed the Farm Mechanisation Program, aimed at supporting commercial agriculture in the country. However, it emerged that the beneficiaries of the program, who were not identified, never paid back the loans. In July 2015, the government took liability of an estimated USD1.35 billion in debt incurred by the central bank before 2008.
The bad link between corruption and debt
With limited private sector opportunities in the country, public office appears to be the most viable means to wealth accumulation. According to an African Forum on Debt and Development policy paper, a large chunk of the debt in Zimbabwe is a result of high-level corruption and bad governance.
“Lack of transparency about how the government borrows and spends money leads to corruption and misuse of public money with the citizens losing out, but the same citizens expected to pay back the money through taxation,” said Mavhinga.
The conflation of state and party business has resulted in growing public debt. For instance, in 2014, when factional fights over power ascendancy raged in the ruling party, it later came to light that state power utility funds had been used to bank roll political campaign activities by former vice president, Joyce Mujuru.
The latest subsidy program termed Command Agriculture is another scheme that threatens the country’s fiscal stability. It emerged that about USD3 billion was injected into Command Agriculture, a scheme to enhance the domestic production of food, outside of parliament and that money could not be accounted for.
The World Bank advises that strengthening governance remains critical towards supporting economic and social recovery, as well as building resilience in Zimbabwe.
“Governance plays a key role to ensure reform momentum and to establish the credibility and sustainability of a national development strategy,” the bank spokesperson said in emailed responses.
It remains imperative for national leadership and policymakers to find the political will to push for judiciousness in debt management, genuine anti-corruption policies and transparency in borrowing, eliminating the danger of excessive debt
Courtesy of : K Chimhangwa