Punching Holes into a Fragile Economy?

Punching Holes into a Fragile Economy explores the possible economic impact of the Private Voluntary Organisations Bill which was gazetted on November 5 2021. Read on to understand why there has been spirited and strong opposition to this Bill which has been labelled arbitrary and retrogressive.

Non-Governmental Organisations (NGOs) are playing an increasingly important role as agents of development. The growth and expansion of NGOs across the globe is testament to their growing role in the development process. Effective partnerships between governments and NGOs are recognised as being crucial in accelerating sustainable development. The role of NGOs is even more important in Low-Income Countries (LICs) where the fiscal space is limited. NGOs offer a broad range of services that include: health, education, social protection, humanitarian assistance, livelihood interventions, emergency response, conflict resolution, democracy building, environmental management, and policy analysis and advocacy. NGOs across the world help to amplify the voice as well enable inclusion of marginalized groups, including women, persons with disabilities and minority ethnic groups so that ‘no one is left behind.’ Creating an enabling environment for NGOs to operate is recognised as being critical for the attainment of the Agenda 2030 on Sustainable Development Goals (SDGs) and the African Union (AU) Agenda 2063: The Africa We Want.

In Zimbabwe, NGOs have been important drivers of sustainable development through a number of channels which include: employment creation, contribution to tax revenues, foreign currency receipts, provision of social protection and humanitarian assistance, growth in the local tourism sector and overall economic growth and development. Owing to the huge financing gap in productivity-enhancing and poverty reducing sectors of the economy such as health, education, social protection, water and sanitation, the country has had to rely on donor financing from international NGOs and development partners. Sustained and strong partnerships with NGOs and other not-for-profit organisations such as trade unions will strengthen the implementation of the National Development Strategy 1 (NDS 1) as well as the attainment of the country’s Vision 2030: Towards a Prosperous & Empowered Upper Middle-Income Society by 2030. However, Government gazetted the Private Voluntary Organisations Amendment Bill on the 5th of November 2021.

The Private Voluntary Organisations Amendment Bill seeks: to comply with recommendations made by the Financial Action Task Force (FATF); to streamline administrative procedures and allow for the efficient regulation and administration of PVOs; and to prevent PVOs from undertaking political lobbying. The Bill also prohibits trusts that are registered with the High Court, but are not registered PVOs, from collecting contributions from the public or from outside Zimbabwe for any of the purposes specified in the definition of ‘private voluntary organisation’ (i.e., charitable purposes, social welfare assistance, legal aid and animal welfare). According to the 2022 Monetary Policy Statement, NGOs are the third biggest earners of foreign currency in the country after export proceeds and diaspora remittances. Total foreign currency receipts (US$ million) from NGOs rose by 50.5% from US$647.78 million in 2020 to US$975.16 million in 2021. This foreign currency is critical in sustaining the foreign currency auction system. Any disruptions in the activities of NGOs through legal and/or non-legal means could result in the country losing out massively. According to the 2019 Labour Force and Child Labour Survey (LFCLS) from the Zimbabwe National Statistics Agency (ZIMSTAT), the NGOs sector employ 1.2% of the total employed which translates to an aggregate figure of 17,643 formal jobs. This translates to thousands of livelihoods that are being sustained through these jobs. To put into context, according to the 2019 Labour Force and Child Labour Survey, the share of informal employment to total employment is estimated at 75.6% in 2019.

Moreover, according to the African Sun Limited 2020 Integrated Annual Report, conferencing business from NGOs have consistently anchored their city and country hotels segment. This segment was their cash cow in 2020 as the impact of the COVID-19 on the Hotels and Tourism sector saw other segments, particularly the Resort Hotels and Leisure Division, plummeting in sales. International room nights declined by 78%, while local room nights decreased by only 28% from 2019 as NGOs, Government and Quasi-governmental organisations continued to operate albeit under restricted conditions. A survey we carried out with a number of NGOs revealed that the contribution by NGOs to tax revenues ranged from US$4,000 to US$35,000 per month depending on the size of the NGO. This is quite significant and has provided the Government with requisite resources to finance development.

NGOs have also played a critical role in bridging the huge financing gap in the critical sectors of the economy such as social protection, education, health, water and sanitation among others. For instance, according to the 2022 National Budget statement, during the period January to September 2021, the country received development assistance amounting to US$647.8 million, of which US$401.9 million was from bilateral partners and US$245.9 million from multilateral partners. A further US$202.4 million in development assistance is projected during the fourth quarter of 2021, giving cumulative receipts of US$850.2 million for the year. In 2022, support from the Development 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. Importantly, a lot of the gains that have been registered key health and social indicators have been on account of the partnership between the Government and NGOs. In general, coverage of social assistance programs in Zimbabwe has been low and inadequate, and in fact declined since the start of the COVID-19 pandemic.

According to the 2022 National Budget, Zimbabwe received an estimated US$130 million in humanitarian assistance in 2021. NGOs have also been playing a critical role in terms of the provision of Water, Sanitation and Hygiene (WASH) services across the country which could be threatened of the activities of NGOs are disrupted. According to the 2022 National Budget Statement, Zimbabwe received an estimated US$13 million towards water and sanitation in 2021. Importantly, a lot of development indicators have been on account of the partnership between the Government and NGOs. For instance, the country has made some progress in terms of reducing mortality. According to the 2019 Multiple Indicator Cluster Survey (MICS), the maternal mortality ratio declined from 651 in 2015 to 525 in 2017 and then 462 in 2019.

According to the 2020 Zimbabwe Progress Report on SDGs, progress has been made with regards to HIV infection, with the number of new HIV infections reducing from 3.9 per 1,000 uninfected population in 2015 to 2.8 per 1,000 in 2019.The malaria incidence per 1,000 population has progressively declined from 29 in 2014; to 14 in 2016; 10 in 2017; and only 5 in 2018. TB incidence has climbed down to 210 per 100,000 population in 2018, from 278 per 100,000 population in 2014. However, some might argue that government is merely targeting NGOs that deal with deal with political and civil rights. International experience from 134 countries, show that bilateral (official) aid flows dropped by 32% in the years after aid-recipient governments introduced new restrictions on NGOs, largely because donors could no longer fund preferred activities.

As many NGOs implement social protection and other anti-poverty interventions, reductions in foreign aid have implied cuts to critical productivity-enhancing services for the indigent and vulnerable. In other studies there is even a greater impact on aid flows, with 45% less foreign aid channelled towards countries that restrict CSOs’ ability to engage in advocacy. Zimbabwe is not likely to be an exception. Moreover, by restricting the civic space, the Bill will result in an increase in the country risk premium which will adversely affect capital and investment inflows into the country. The country’s re-engagement efforts with the international community will also be negatively affected.

In addition, no NGOs in Zimbabwe have been implicated in money laundering and terrorist financing. The main offences used to generate money laundering proceeds include:

  • Fraud;
  • Contravention of the Customs & Exercise Act;
  • Contravention of the Gold Trade Act;
  • Corruption; and
  • Contravention of the Income Tax Act.

Twelve sectors were assessed and the high threat level sectors were found to be Banking, Real Estate, Motor Vehicle Dealers, Mining and Mobile Money dealers. NGOs were not identified as a risky sector. On the other hand, the overall terrorism and terrorist financing threat in Zimbabwe was rated low. Within this context, any disruptions in NGO activities and financing will likely worsen the poverty situation and threaten the development gains that have been made to date. Importantly, in Zimbabwe there has been no instance of terrorist financing in the NGOs sector. In line with regional and international best practices, any anti-money laundering and counter-terrorism financing measures and regulations should be designed and implemented on the basis of a national NGO sector risk assessment. No additional regulations should be applied if existing legislation and/ or other measures are sufficient to mitigate risks. FAFT’s Recommendation 8, which calls for a review of the laws and regulations governing non-profit organizations to ensure that they cannot be used to finance terrorists, is meant to apply solely to those NGOs that are most vulnerable to terrorist financing abuse. In a number of countries such as Kenya and Ethiopia, they are adopting more liberal laws allowing NGOs more scope for activities.

Adding more regulations to the NGOs sector will cause a number of NGOs to go underground which will increase the risk of fraud and money laundering that Government is trying to deal with. 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. Importantly, creating an enabling environment for NGOs to operate is critical in the attainment of the country’s Vision 2030.

Read the full publication here (1MB PDF)

Source: Zimbabwe Human Rights NGO Forum, Southern Africa Human Rights Defenders Network


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