eBusiness Weekly
Business Writers
The BWP500 million ($50,4 million) line of credit that was extended to Zimbabwe to jump-start the economy immediately after the consummation of the inclusive Government in 2009, is back on track after it emerged both countries are working towards crafting better financing mechanisms.
The line of credit was initially supposed to help spur Government’s economic blueprint, the Short Term Emergence Recovery Programme (STERP), but specifically targeting industries that would contribute to Botswana’s economy.
However, the credit facility ran into problems amid reports that an international guarantee could not be obtained for the release of the funds.
Sources told Business Weekly that there is a proposal now to renegotiate the deal and potentially come up with a new and better financing mechanism.
Government sources yesterday said the deal is back on track and relevant ministries in Botswana and Zimbabwe are working around the clock to tie it up.
“You may be aware that the Government of Botswana offered a BWP500million facility to the Government of Zimbabwe. The facility was proposed to be channelled to industries through banks.
“The industries earmarked were those that would also contribute to the Botswana economy. However, the facility could not take off because of several challenges including the absence of an international guarantee and the limits that the banks in Botswana could lend to foreigners.
“In this regard, there is a proposal to renegotiate the facility and come up with a better financing mechanism,” said the source.
Information also indicates that the Botswana government has resolved to revive the P500 million-credit facility.
The Botswana Guardian, a newspaper in the neighbouring country, reported on April 17 this year that there are frantic efforts to rescue the deal.
The newspaper quoted Minister of International Affairs and Cooperation, Vincent Seretse, saying former President Ian Khama expressed his desire to ensure the credit facility sailed through.
“We had signed on our side but Zimbabwe could not sign because of the challenges that they were facing. When President Emmerson Mnangagwa visited Botswana he made enquiries about it.
“The then President Khama promised that it would be dealt with and as we speak relevant ministries are busy with it.
“We are hopeful that in few months’ time, everything would be concluded,” Minister Seretse was quoted by the Botswana Guardian as saying.
The draft agreement is understood to have been submitted to Zimbabwe in April 2011.
Under the agreement, the Botswana government would avail a partial guarantee for the credit facility while Zimbabwe provides a counter guarantee and indemnity to Botswana for the risk or exposure.
In addition, the Export Credit Insurance Company Botswana (BECI) is expected to enter into subsidiary finance guarantee agreements with participating local banks.
The two neighbouring countries have reportedly agreed that 70 percent of the credit facility would go towards the manufacturing sector with the balance of 30 percent being channelled towards other sectors.
There are efforts to consummate the agreement at the earliest possible convenience.
Zimbabwe and Botswana signed a Bilateral Investment Promotion and Protection Agreement (Bippa) in March following the realisation by the two governments that there was need to ramp up investment among themselves.
The two countries are working towards deepening their economic relations which had become frosty in the last decade or so.
Already, the Botswana Investment and Trade Centre – a national body responsible for trade and investment – has signed Memoranda of Understanding (MoUs) with ZimTrade and the Zimbabwe Investment Authority (ZIA) aimed at boosting cooperation between the two countries.
