On Monday, March 4, President Biden signed an executive order terminating the Treasury Department’s Zimbabwe sanctions program and the over two-decade-old national emergency declaration that underlay it.

To understand what’s going on, let’s go back to Executive Order 13288. Following the terribly planned and executed land reform programme and rampant political violence in Zimbabwe in the early 2000s, the USA, under George W. Bush signed Executive Order 13288 in 2003. It had the following provisions:

• It declared a national emergency and blocked the property of certain individuals and entities in Zimbabwe

• It cited the “unusual and extraordinary threat to the foreign policy of the United States” posed by the actions and policies of certain members of the Zimbabwean government

• Its justification was that the Zimbabwean government was engaged in actions and policies that undermined democratic processes and institutions, including violence, intimidation, and repressive legislation

• It authorised the US government to freeze the assets of individuals and entities deemed responsible for undermining democratic processes in Zimbabwe.

This executive order was terminated by Biden.

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But there’s a caveat

The US then issued sanctions against several businesses and individuals in Zimbabwe, including its president.

I’d say these are warranted. And at least they don’t negatively affect the entire country directly.

But these remaining sanctions have a spillover effect…

Even though the emergency has been lifted and the majority of sanctions no longer exist, there are still 14 Zimbabwean individuals and entities under Magnitsky sanctions, including the president, the vice president, and the first lady, the heads of police, intelligence, and defence, and prominent businessman Kuda Tagwirei and others linked to the Fossil Group conglomerate, which includes Fossil Contracting, Fossil Agro, and Fossil Mines. One additional Zimbabwean entity, a safari company, is designated under separate authorities, for alleged ties to a sanctioned Venezuelan businessman.

The problem with this is banks and investors from developed countries are frightened off by sanctions of any kind. A form of over compliance mean they rather stay away than risk doing business in a country with the risk of sanctions.

Civil penalties of up to $289,000, or twice the amount of underlying transaction, may be imposed against persons who violate Zimbabwe sanctions.

A multi-million-dollar deal with a Zimbabwean firm that turns out to have significant shareholding by a sanctioned individual could bankrupt someone.

Not much is changing for Zimbabwe yet…

While the change in stance by the US could signal the start of better things to come for Zimbabwe – not much has changed.

There’s still an autocratic, corrupt government.

There are still sanctions – and still risks to doing business with the country.

Hopefully change will come – as several SA listed companies have operations in Zimbabwe. These include companies like Implats, Tharisa, Choppies, Anglo Plats, Nampak, PPC, Pick n Pay and Pepkor. Some of which are in my Red Hot Penny Shares portfolio.

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