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Crunch for Mugabe as $1bn loan talks start
Vukani Mde and Karima Brown, Business Day (SA)
August 04, 2005

http://www.businessday.co.za/articles/frontpage.aspx?ID=BD4A76617

FINANCE Minister Trevor Manuel and Reserve Bank governor Tito Mboweni will meet their Zimbabwean counterparts in make-or-break talks today on strict conditions in exchange for a $1bn bale-out for SA's troubled neighbour.

SA has put in place tough political and economic conditions aimed at normalising crisis-ridden Zimbabwe.
They include the urgent resumption of talks between President Robert Mugabe's government and the opposition Movement for Democratic Change (MDC), constitutional reforms, restoration of the rule of law and repealing repressive laws.

Sources in Harare confirmed last night that Zimbabwean Finance Minister Herbert Murerwa and central bank governor Gideon Gono were already in Pretoria ahead of a Southern Africa Development Community finance ministers' meeting tomorrow.

Manuel is expected to use today's meeting to spell out to the Zimbabweans the strict conditions under which SA is prepared to extend financial aid.

The conditions are in line with President Thabo Mbeki's stated view that Zimbabwe needs an extensive economic recovery plan that will be sustainable in the long run. This would include a review of the role of Zimbabwe's central bank and the ditching of its dual-currency system.

Following a cabinet meeting yesterday, government was at pains to avoid being seen as imposing conditions on Zimbabwe at today's talks.

"On principle we don't deal with other countries on the basis of conditions," said chief government spokesman Joel Netshitenzhe. SA was also keen to avoid being viewed as "big brother" in its dealings with Zimbabwe.

Today's talks are seen as crucial to averting Zimbabwe's expulsion from the International Monetary Fund (IMF), something Mugabe would like to avoid. The country needs to settle its IMF arrears of $295m to avoid expulsion.
Netshitenzhe said the IMF had given Zimbabwe four weeks' grace, following talks between the country and the international lender. SA was willing to put up the minimum needed to prevent Zimbabwe's expulsion.

"In principle, government is open to such assistance, including provision of a loan facility in relation to Zimbabwe's obligations to the IMF. Our approach on this matter is premised on the principle that such assistance should be to the benefit of the Zimbabwean people as a whole, within the context of their programme of economic recovery and political normalisation," Netshitenzhe said.

Today's meeting comes amid tangible signs of a meltdown of Zimbabwe's economy.

Crippling fuel shortages coupled with frequent power outages are about to bring the country to its knees. There are also massive food shortages, particularly in rural areas, where the chaotic land-redistribution strategy has undermined food security.

There are also signs that Mugabe and his ruling Zanu (PF) party are increasingly under pressure to secure quick funding sources.

Following his failed bid to secure money from China last week, Mugabe is now reportedly making overtures to Uruguay. It is not known whether the pleas to the South American country have yielded any results.

His trip to China, which some analysts said was an attempt to avoid SA's loan conditions, backfired as he returned from Beijing with a pledge of only $6m for food aid.

Zimbabwe's government has previously relied on assistance from Libya's Muammar Gaddafi in exchange for mineral rights in the resource-rich country.

However the situation has so deteriorated in Zimbabwe that Mugabe has no option but to turn to Pretoria for a lifeline, despite his announcement last week that he would not be dictated to by any foreign country.

Today's talks, coupled with the dire situation in Zimbabwe, will for the first time allow SA to exercise leverage over Mugabe.

However, Mbeki has always insisted that Zimbabweans themselves come up with the solution to their country's impasse.

Mbeki has also recently insisted that the international community stay engaged with Zimbabwe.
Yesterday Netshitenzhe reiterated this call.

"Government will work with the United Nations and South African religious leaders to provide emergency humanitarian assistance particularly in the aftermath of Operation Restore Order," he said.

SA has indicated its support for UN envoy Anna Tibaijuka's scathing report on the urban forced removal operation, which she said had displaced 700 000 people. SA's talks with the Zimbabwean officials today mark the culmination of Mbeki's multi-pronged approach, marking a departure from expectations that the South African government alone had to broker a solution in Zimbabwe.

Besides Manuel's financial leverage, Mbeki has also given his blessing to civil society organisations. He is expected to meet the South African Council of Churches (SACC) on Tibaijuka's findings, as well as to be briefed by the church group on its humanitarian mission which left for Zimbabwe earlier this week.

Meanwhile, opposition parties reacted with outrage to yesterday's cabinet announcement that SA would bale out Zimbabwe.

"The decision in principle by cabinet today to provide a loan facility for Zimbabwe, for it to meet its debt obligations towards the IMF, amounts to an endorsement of the Mugabe government and its policies. SA is helping to prop up a government which has recently been described by the United Nations as carrying out policies which are a 'clear violation of international law', said Democratic Alliance chief whip Douglas Gibson.

Gibson said government had shifted from "quiet diplomacy" to "active support" of Mugabe.

"This is taxpayers' money which will be spent on Zimbabwe, hence taxpayers are entitled to know the conditions attached to this gift," he said. The Constitution required the final decision on the gift to be debated in Parliament as soon as it reconvened later this month, he said.

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