Zimbabwe: SA throws US$500 million lifeline to Harare

JOHANNESBURG -- South Africa has provisionally agreed a US$500 million bailout for Zimbabwe, enough to clear its northern neighbour's debt with the International Monetary Fund (IMF) and leave some change for Harare to buy critically needed food and fuel, authoritative sources told ZimOnline.
The sources said South African President Thabo Mbeki would meet President Robert Mugabe on the sidelines of the African Union extraordinary summit taking place in Ethiopia "just to round off discussions" on political conditions Pretoria has set for the loan.

South African Reserve Bank governor Tito Mboweni and Finance Minister Trevor Manuel were expected to lay out the economic conditions for the loan at talks with Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono and Finance Minister Herbert Murerwa who arrived in South Africa on Thursday, according to the sources.

"South Africa is going to give a total of about US$500 million with the first tranche of that money going to immediately paying off Zimbabwe's outstanding debt with the IMF," said one source, who declined to be named for professional reasons.

The source privy to the financial assistance deal added: "Mbeki is going to meet Mugabe just to clear out the political issues but the finer details and the economic conditions of the loan are going to be ironed out by Manuel, Mboweni and their Zimbabwean counterparts."

It was not possible to immediately get comment on the matter from the spokesmen for Mbeki and Mugabe or from Manuel, Mboweni or their Zimbabwean guests. Zimbabwe had asked for US$1 billion to pay off its US$300 million debt to the IMF and to pay for oil and fuel imports.

The crisis-hit country requires at least US$40 million for fuel every month while it also requires millions more in hard cash to import 1.2 million tonnes of food after poor harvests last season.

South African government spokesman Joel Netshitenzhe on Wednesday announced that Pretoria was not going to provide the whole amount sought by Zimbabwe but he declined to say how much exactly Harare would receive.

Netshitenzhe, who said the date when the loan would be finally granted depended much on the IMF which has given Zimbabwe up to the beginning of September to pay back or be expelled, also downplayed whether there were any conditions attached to the loan.

He only said the loan agreement was "in the wider context of Zimbabwe's economic recovery and the process of political normalisation."

But media reports in the last three weeks and which South Africa has not denied indicated that Pretoria was demanding wide-ranging political and economic reforms by Mugabe's government including reopening negotiations with the opposition to find a solution to Zimbabwe's crisis before it could release money.

Mugabe, who has been to China seeking money in what observers said was an attempt to avoid stringent conditions by South Africa, indicated on his return from Beijing that he was not going to be ordered to speak to the main opposition Movement for Democratic Change party by anyone. The Zimbabwean leader may however mellow down on talks given Harare's dire financial straits.

Another issue likely to be raised by Manuel and Mboweni in their meetings with Murerwa and Gono is the overbearing powers of the RBZ, which has virtually taken over the role of Zimbabwe's Ministry of Finance.

Mbeki and the IMF have both criticised the RBZ saying the central bank should revert back to its monetary role.

The South Africans are also said to be keen to see Zimbabwe moving to revive its agricultural sector which collapsed after Mugabe seized productive land from white farmers. Meanwhile, Reuters agency on Thursday quoted unnamed IMF officials saying the fund was waiting for details of South Africa's loan to Zimbabwe before it could decide how to act on Harare. - ZimOnline