MUTARE- The government has been warned of adverse economic impact due to the proposed ammendments to the Private Voluntary Organisations Act.
An analysis of the financifial fallout of restrictions on civil society operations, projects a decline in foreign currency inflows, job losses and increased vulnerabilty of the poor relying on social protection.
Bilateral (official) aid flows, the third biggest earners of foreign currency, could drop by between (30-45%) as observed in other recipient governments- when restrictions were placed on NGOs, according to financial experts in Punching holes into a fragile economy, a Research Report released in February.
Renowned economist Dr Prosper Chitambara, Clinton Musonza and Phillan Zamchiya co authored the report, for a consortium of local civic organization, project that disruptions in the operations of the NGOs will affect foreign currency inflows, stability and sustainability in the economy.
“By restricting the activities of NGOs, the Amendment Bill will likely limit/restrict economic and political freedom in the country. The country already performs badly on the major economic and political freedom indices…
“The Amendment Bill will also result in a decline in foreign funding for NGOs which will affect
the capacity of the country to address poverty and hunger as well as achieve sustainable development.”
The government gazetted the Private Voluntary Organisations Amendment Bill on 5 November [GN 3107 of 2021] to comply with the Financial Action Task Force (FATF) Recommendation 8- recommend countries to strengthen legal framework to combat money laundering, financing terrorism and proliferation.
The report, in a broad financial outlook on impacts of restrictions, warns that such regulations could potentially “cause many NGOs to go underground, open off shore bank accounts, and could even increase the risk of fraud and money laundering.”
Findings of the analysis modelled on best practices to curb fraud and money laundering FAFT’s, government’s regulations were not justified a low-risk sector with no precedence of financing terrorism and money laundering, with provisions that go beyond to stifle other freedoms.
“The country’s current regulations and laws are robust enough to deal with any threat of fraud or money laundering by NGOs which threat remains very insignificant.
“If the Bill is enacted, it will stifle not only democracy but also economic development because it has provisions that prohibit fund raising by Trusts, ban political lobbying by PVOs and imposes heavy civil penalties for certain contraventions of the PVO Act.”
Extensive Ministerial powers grant no appeal against a civil penalty order, except to the person (appointed Board) who imposed it and the officers of a defaulting PVO can be rendered liable to pay a civil penalty, regardless of their individual fault.
“Clause 5 has a provision that permits the PVO Board to cancel the registration of a PVO if it engages in political activities. However, it is almost impossible to determine what political activities will trigger cancellation.
“PVOs will be deterred from expressing any form of support for any political party, supporting particular policies put forward by a political party and engaging in civic education, election observation or similar activities in fear of registration cancellation,” reads part of the report.
The country continues to overly rely on external funding a huge financing gap in productivity-enhancing and poverty reducing sectors of the economy such as health, education, social protection and water and sanitation.
In healthcare NGOs supply 35% of all hospital beds- 96% of NGO facilities are located in disadvantaged rural areas, the reports states.
The 2022 Monetary Policy Statement, total foreign currency receipts (US$ million) shows that NGOs are the third biggest earners of foreign currency, at an increase of 50.5% from US$647.78 million in 2020 to US$975.16 million in 2021.
Ministry of Finance and Economic Development, in the 2022 National budget projected a slight decline, with support from partners is projected at US$761.5 million, broken down as, US$274.3 million and US$487.2 million from multilateral and bilateral partners, respectively.
Zimbabwe is in debt distress with total Public Debt estimated at US$13.7 billion as at the end of September 2021 up by 28% from 10.7 billion as at end of December 2020, according to the 2022 National Budget Statement, representing 72.6% of Gross Domestic Product (GDP).
“This is higher than the 70% threshold provided for in the Public Debt Management Act (Chapter 22:21) and the SADC Regional Indicative Strategic Development Plan (RISDP) Public Debt-to-GDP Macroeconomic Convergence Target of 60%.”
Further, the reports states that excessive government borrowing-high public debt is compounded by corruption “one of the biggest challenges facing the country…”
“Corruption affects development through lowering the level of both public and private investments, discourages foreign investment and capital inflows, disincentives new business activities and innovation, diminishes public revenues through tax evasion and embezzlement, increases the cost of production and doing business, and it also results in a misallocation of resources in the economy,”
“The Government on its own cannot resolve this challenge. NGOs represent an important independent and influential corruption watchdog and holding the Government accountable. Any disruptions in NGO activities and financing will likely worsen the situation,” reads the part of the report.
