Previous Quarterly Editions
Expropriation Risk: 85 79 75 77 Political Violence Risk: 62 62 59 58 Terrorism Risk: 25 25 25 25 Exchange Transfer and Trade Sanction Risk: 91 92 93 91 Sovereign Default Risk: 90 90 90 92
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Although only a few COVID-19 cases had been officially identified by then, President Emmerson Mnangagwa ordered a 21-day lockdown from the end of March 2020 with only state and health workers exempt. The move reflected the fact Zimbabwe’s population has an elevated risk as a result of its levels of poverty, poor nutrition and co-morbidity. Moreover, its health service was just getting over the four-month strike by doctors over pay and conditions that had ended in January 2020, and it continues to experience a severe shortage of medical supplies. Doctors and nurses went on strike again in late March 2020 to protest the lack of personal protection equipment, as did customs officers. The pattern of government harassment of opposition and civil society figures has continued into 2020. This low-key campaign involves arrests, charges of subversion and long remands on bail. Some of the cases that have come to court have been dismissed, suggesting that the judiciary retains some independence and that the government’s tactic is to intimidate and break up opposition rather than suppress it altogether. However, potential protestors are aware that the security services remain prepared to use deadly force against demonstrators, as they did in 2018 and 2019. Displeasure at court dismissals of subversion charges could have encouraged President Mnangagwa’s proposed constitutional changes that relate to judicial appointments. At the start of 2020, the ruling Zanu-PF (ZPF) government proposed 27 amendments to the current constitution, which was approved overwhelmingly by voters in a referendum under the power-sharing administration of ZPF and the Movement for Democratic Change (MDC) in 2013. It seems clear that Mnangagwa wants to replace the 2013 document with a more partisan version. Particularly controversial are proposals to concentrate judicial appointments in the hands of the president, increase presidential control of the civil service, and undermine parliamentary oversight. Public hearings on the amendments were scheduled to be held across the country in April 2020 and May 2020 but have been postponed by lockdown provisions. Critics have seen the amendments as part of a drive to create an ‘imperial presidency’ around Mnangagwa, now 77, who has already been chosen as the ZPF candidate for the next presidential election due in 2023. However, there are suggestions of a developing power struggle between the incumbent and his deputy Constantino Chiwenga, the army commander who led the coup that brought Mnangagwa to power in 2017. The African Development Bank’s recent growth projection of 4.6% for 2020 has been thrown seriously off course by the consequences of the virus, and the same is true for the Zimbabwe government’s optimistic forecast of a tenfold drop in inflation to 50% by the end of this year. Rains across the centre of the country have brought some relief from drought conditions, but steeply rising maize prices and the likelihood of below average rainfall again this year mean that, according to the World Food programme, eight million Zimbabweans face severe hunger, 2.2 million of them in country’s urban areas.
Although the Mugabe-era policy of indigenisation has been replaced by President Mnangagwa’s ‘open for business’ approach, the idea that businesses in the country should be owned by Zimbabweans remains deeply engrained. It has been so central to the ruling ZPF party’s populist message, as well as its system of patronage, that the government has not yet dismantled the legal framework that underpinned Mugabe’s indigenisation policy or given specific guarantees against its resumption. As a result, the threat of expropriation will continue to weigh on investor confidence, especially as the country moves into conditions of even greater economic distress from the impact of the virus and creates a situation that could encourage a return to populist policies.
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The readiness of the government and the security forces to respond to civil unrest with draconian action, together with the lack of focused leadership in a still fragmented and internally feuding opposition, has meant that anti-government protests had already been limited before the virus outbreak. Political violence is more likely to come from the state security apparatus rather than the opposition, with the use of deadly force backing up a policy of intimidation and harassment through arrests and prosecutions that is intended to disrupt opposition efforts to organise. If political stagnation, progressive economic collapse, and collateral hardship are amplified by the impact of COVID-19, then renewed political intervention by Zimbabwe’s highly politicised armed forces is possible, especially in the event of a leadership clash.
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Zimbabwe has had no experience of international terrorist activity, and the risk of a terrorist attack by external groups is low given the lack of leverage for external ideologies such as jihadism. Internally generated risk is low because terrorism is not part of the opposition repertoire, either ideologically or practically given the strength of the security services.
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Zimbabwe’s GDP contracted by 12.8% in 2019 and inflation reached 521% at the end of the year, driven by the consequences of unpegging the exchange rate from the US dollar early in 2019 and the subsequent introduction of the new Zimbabwe dollar. The shortage of basic goods and rises in state-controlled utility prices also contributed, with electricity tariffs rising by 320% in October 2019. At the end of March 2020, the central bank announced the reintroduction of the multi-currency regime and pegged the local Zimbabwean dollar at 25 to the US dollar as part of the measures. The bank called the move a response to the financial vulnerabilities caused by the COVID-19 pandemic, but it was already clear that unpegging the Zimbabwe dollar was not working. At the same time, the bank also reduced its main lending rate from 35% to 25%.
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The IMF concluded its Article IV consultation with Harare in February 2020 with the assessment that the Zimbabwean government had neither defined the means and resources to clear arrears to the World Bank and other multilateral lenders, nor undertaken the economic reforms that would facilitate its ability to do so. Public debt remains above 70% of GDP, with 87% owed to external creditors. The African Development Bank estimates the total at 8 billion USD, of which almost 6 billion is accumulated arrears. It is not clear to what extent Zimbabwe can expect to benefit from multilateral programmes being devised to help heavily indebted countries cope with the economic consequences of COVID-19, but it will certainly need assistance.
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