Previous Quarterly Editions
Expropriation Risk: 79 75 77 77 Political Violence Risk: 62 59 58 55 Terrorism Risk: 25 25 25 25 Exchange Transfer and Trade Sanction Risk: 92 93 91 92 Sovereign Default Risk: 90 90 92 93
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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.
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The failure of President Mnangagwa’s ‘open for business’ approach to reforming the economy has opened the door for a resurgence of the idea that businesses in the country should be owned by black Zimbabweans. This was a central tenet of the last years of Robert Mugabe’s rule and it remains deeply embedded in populist expectations. As long as the patronage system operated by the ruling ZPF remains intact, and until specific legal guarantees are given against the resumption of some form of the previous indigenisation policy, the threat of expropriation will continue to weigh on investor confidence. This confidence will also remain low so long as the country’s economy remains so fragile that political stability is based on repression rather than consensus.
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The government remains ready to respond to any indication of civil unrest with draconian action from the security forces. However, its ability to foster internal feuding with an opposition that remains highly fragmented has helped to reduce the need to deploy violence in the absence of effectively organised protests. The restrictions against gatherings as part of the response to COVID-19 is also helping. Intensifying economic hardship, continuing political repression, and the authoritarian imposition of lockdown rules could lead to a backlash of unrest, but this is likely to be spontaneous, disorganised, and easily repressed. If political stagnation and the progressive economic collapse continue, amplified by the impact of COVID-19, then renewed political intervention by Zimbabwe’s highly politicised military 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 has been low. As current chair of the Southern Africa Development Community’s Troika on Politics, Defence and Security, President Mnangagwa presided over an extraordinary meeting in May 2020 that was called in response to Mozambique’s request for help to address a rising threat from jihadist terrorists around Cabo Delgado, near Mozambique’s border with Tanzania. If Mnangagwa commits Zimbabwean troops in solidarity with its neighbour, this could raise Zimbabwe’s own profile as a potential terrorist target.
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The precipitate decline in the value of Zimbabwe’s currency has led the government, working through the central bank, to impose draconian controls on bank transfers in order to curb illegal financial transactions, which it blames for the currency’s fall. In May 2020, the central bank limited internal bank transfers to two a day. In June 2020 the government suspended transactions on the Zimbabwe Stock Exchange, whose value has risen seven-fold in 2020 amid ongoing depreciation of the local currency and spiralling inflation. It also put a tight daily cap on money transfers via mobile devices, claiming that the stock market and mobile transfers were being used to influence exchange rates illegally to the detriment of government monetary policy. By pegging the Zimbabwean dollar, introduced in June 2019, to a fixed rate of 25 to the US dollar in March 2020, just as COVID-19 began to accelerate the pace of economic collapse, the government boosted an already flourishing parallel market on which the local currency has been fluctuating considerably. In late June 2020, the government abandoned the fixed rate and introduced weekly auctions. The rate established at the first auction was 57 to the US dollar, considerably below parallel rates of 80-95 to the US dollar. In June 2020, the inflation rate was 766% year-on-year.
The government expects the economy to shrink by as much as 15-20% during 2020. The COVID-19 pandemic has exacerbated already negative economic trends, including reducing remittances from the Zimbabwean diaspora that have been a crucial support to consumption by Zimbabwean families in the recent past. Some estimates suggest that the lockdown could cost the country 25% of formal jobs and 75% of informal jobs. Zimbabwe has not been included in the 25 developing countries, mostly from Africa, that qualified for a half-billion-dollar (USD) debt relief package from the IMF to help them cope with the COVID-19 pandemic. Because Zimbabwe still has outstanding unpaid loans to other institutions, including the African Development Bank and the World Bank, it cannot access IMF concessionary funding.
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