In a sign that the frosty relations between Harare and Western countries may be thawing, the EU on Thursday made €15m (R260m) available to Zimbabwe to alleviate hardship from Covid-19.
Poor relations between Brussels and Harare have been the rule for the past 22 years after the EU slapped sanctions on the late former president Robert Mugabe and his government in 2002 for election theft, political violence and human rights abuses.
But recent engagements have seen the EU easing its restrictions on Zimbabwe. Though the amount sat aside on Thursday is minuscule compared to the huge funding the country requires to revive its economy, it is the gesture that is important, analysts said on Thursday.
The money, availed by the European Investment Bank (EIB), will be managed by one of Zimbabwe’s top banks, Central African Building Society (Cabs) and is largely meant to help companies in distress because of the pandemic.
The EU embassy in Harare called the financing of parts of the private sector a “memorable moment” in a statement. “It’s a huge step for access to finance in the country,” it said.
Thomas Östros, the EIB vice-president, said the targeted financing will help the companies involved recover from the effects of Covid-19. “As part of Team Europe, the European Investment Bank is pleased to provide €15m of new targeted financing to partner bank Cabs to strengthen private sector investment, create jobs and accelerate the postpandemic recovery of Zimbabwe,” Östros said on Twitter.
“The European Investment Bank and Cabs unveiled €15m Covid-19 resilience business financing initiative, the first-ever EIB partnership with a Zimbabwean commercial bank and first engagement in Zimbabwe in 22 years,” he said.
Cabs MD Mehluli Mpofu said the funds will unlock new private sector financing for businesses to acquire long-term loans that will be available in foreign currency, of which there is a shortage in Zimbabwe.
Harare-based economist John Robertson said the move by the EIB could signal better prospects for Zimbabwe, which is in a stand-off with international creditors because of the country’s bad reputation for clearing debts.
“It means a lot for Zimbabwe because potentially it could open more avenues for additional support from EIB for Zimbabwe, even though the amount is not that huge,” Robertson said.
“I think this is a result of some of the positive things that the government has done, mainly the commitment to compensate white farmers who were removed from the farms.”
It is “worth noting that the money was allocated to a private bank and not the government” as international creditors do not trust the government, which is dogged by corruption, Robertson said.
Zimbabwe has a bad record in repaying loans over the past 20 years and is $700m in arrears at the African Development Bank (AfDB) and $2bn at the World Bank. As a result, the country does not qualify for new loans from international financial institutions.
In February, the EU renewed its arms embargo against Harare and maintained an asset freeze on the Zimbabwe Defence Industries. It urged the government to investigate the role of security forces in human rights abuses after several incidents in which soldiers killed protesting people.
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