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The Africa Confidential Blog

  • 19th September 2018

ZIMBABWE: Mnangagwa announces $500 million in new loans as Britain backs bid for IMF programme and debt deal

Patrick Smith

Debt and finance are the big stories this week in Southern Africa this week as shown by the growing international interest in our reporting on the economic crisis in Zambia (AC Vol 59 No 18, Graft worsens cash squeeze & Bonds, bills and ever bigger debts). We're also looking at the woman who takes over South Africa's biggest union federation, and the forced resignation of Nigeria's finance minister, Kemi Adeosun. And we report on new law suit by Libya claiming corruption by one of the biggest investment banks in the world.

ZIMBABWE: Mnangagwa announces $500 million in new loans as Britain backs bid for IMF programme and debt deal
Although the opposition staged a walk-out during President Emmerson Mnangagwa's speech to parliament yesterday (18 September), the country's trading partners and main financiers have started to put the disputes over the 30 July elections behind them. It comes in spite of overwhelmingly negative reports by United States and European Union observers on the fairness of those elections, and Washington's insistence that it would not back any deal between Harare and the International Monetary Fund.

Mnangagwa announced to parliament that $500 mn. in new credits would be made available to local companies to ease the country's foreign exchange squeeze. A day earlier, Britain's outgoing ambassador, Catriona Laing, announced that London would fully support any plan for an interim agreement with the IMF. Launching an interim or staff monitoring programme with the IMF doesn't require a vote by its directors.

Nor does it involve the release of any funds to the client country. But such a shadow programme with the IMF would greatly boost the confidence of international lenders in the government.

Mthuli Ncube, Harare's technocratic new finance minister, has said the government has not decided whether it wants to apply for a debt reduction programme with the World Bank and the IMF. Currently, Zimbabwe has arrears with the World Bank and the African Development Bank worth some $1.8 bn., which rules out any fresh credit from those institutions.

Ncube says he wants to stop issuing Zimbabwe's bond notes, a surrogate currency linked in theory to the US dollar, as soon as possible. But the government is yet to produce an alternative. Mnangagwa told parliament that there would not be an early return to Zimbabwe's national currency which it dropped in 2008 after years of hyper-inflation.

SOUTH AFRICA: First woman president for trade union federation emerges as Ramaphosa lashes out at plot by Zuma allies
Tomorrow (20 September), Zingiswa Losi takes the reins at the Confederation of South African Trade Unions (Cosatu) becoming the first female head of the labour grouping.

The elevation of Losi, a close ally of President Cyril Ramaphosa, means that the leadership positions of the federation will be divided equally between men and women. It will be the only organisation allied to the African National Congress to have achieved the party's goals of gender parity.

Getting stronger support from Cosatu will help Ramaphosa in the difficult months leading up to elections next year. The government has to balance market expectations about cuts in government spending with the need to persuade South Africans that the ANC, under its new leadership, will create jobs and raise living standards.

This week Ramaphosa pledged that the government's restructuring would not mean wide-scale redundancies in state-owned companies. Ramaphosa also hit out at politicians that accused of trying to divide the ANC.

This follows revelations in the Johannesburg Sunday Times last week that the ANC's Secretary General was one of a group of politicians meeting ousted President Jacob Zuma to lobby for the forced exit of Ramaphosa from the top job.

NIGERIA: Finance minister quits over forged certificate row as government hits out MTN telecoms and HSBC bank
A daunting list of challenges – including a politically-infused row with a couple of international corporations – confront new Finance Minister Zainab Ahmed, who took over on Monday (17 September). Formerly deputy Minister of Budget, Ahmed will have to counter several negative reports about the government's openness to foreign investment after public rows with the South African telecoms giant MTN and the Hong Kong-based HSBC.

The government is demanding $8 bn. in back taxes from the highly profitable MTN and it lambasted HSBC for laundering state resources stolen during General Sani Abacha's regime. A French probe found over $100 mn. in HSBC accounts controlled by allies of Abacha. Earlier this month, HSBC had published a damning report on the Buhari government's economic management.

New minister Ahmed replaces Kemi Adeosun, who resigned from the finance job on Friday (14 September). Media pressure had been mounting on Adeosun to quit following a report by the online newspaper Premium Times asserting that she had tendered a forged certificate with the National Youth Service Corps to meet the government's formal requirements.

Under government rules, all state appointees should have served either in the NYSC or the armed forces or have produced a bona fide certificate of exemption. Adeosun's exemption certificate was forged, the Premium Times said, but there was no formal response from government.

LIBYA: Investment authority accuses JP Morgan of paying $6 mn. bribe to Gadaffi ally on $200 mn. bond deal
Once boasting a savings portfolio of around $200 bn., the Libyan Investment Authority is taking on another international bank accusing it of colluding in corrupt diversion of funds from the country. This time the Authority has launched an action in the London High Courts against J P Morgan, the United States investment banking giant, for making a corrupt payment of $6 mn. to Walid al Giahmi, an ally of ousted leader Moammar al Gadaffi, to secure the management fee on a $200 mn. bond. J. P. Morgan denies wrongdoing and is defending the case.

The LIA has a mixed record on legal cases against international banks. Its case against France's Société Générale, in which Giahmi was also implicated, resulted in the bank paying $1.7 bn. in settlements and regulatory fines. But its case against Goldman Sachs also covering a period prior to the overthrow of Gadaffi in 2011 failed in court.

The week ahead in brief
ERITREA/ETHIOPIA/DJIBOUTI: Saudi Arabia hosts regional deal-making sessions, trying to expand influence in the Horn and beyond
ALGERIA: High-level purge continues as President Bouteflika sacks army and air force commanders
SOUTH SUDAN: Fighting restarts in Yei between forces loyal to Salva Kiir and Riek Machar just days after the latest peace deal
BURUNDI: Bujumbura threatens to quit UN Human Rights Council after Nkurunziza regime accused of crimes against humanity