eBusiness Weekly
Martin Kadzere and Golden Sibanda
Standard Chartered Zimbabwe is mulling engaging United Kingdom development finance institution, CDC, for an additional loan funding to support private sector, as it emerged Britain’s first loan to the country in over 20 years, has all been committed.
Zimbabwe could not access commercial loans from most western countries, not least the UK since 2000, after former President Mugabe’s spectacular fall out with the erstwhile colonial master, Britain, over the manner in which Harare dispossessed white former commercial farmers land and distributed it to landless blacks.
While the West has often branded elections in Zimbabwe, unfree, unfair and undemocratic, London has since fallen over President Mnangagwa open approach, with his pro-business and investor friendly dispensation promising free, fair and credible harmonized election.
The $100 million loan package, which Standard Chartered obtained from CDC for the private sector, was targeted at companies in sectors like food processing, manufacturing and agriculture, while lack of funding has choked efforts to ramp up production.
But it emerged, amid cutthroat competition for elusive foreign currency to import critical spares and raw materials, many companies are struggling to sustain operations and increase production due to challenges in obtaining central bank allocated hard currency.
“Yes, the facility has been allocated. For this first phase of the facility, a robust process was carried out to identify the beneficiaries from our current clients list,” said StanChart Zimbabwe spokesperson Ms Lillian Hapanyengwi in e-mailed responses.
“We remain committed to providing offshore facilities to our clients and enhancing their ability to generate additional exports and alleviating their foreign currency needs.
“We continue to review the situation and will consider arranging additional facilities subject to successful disbursement of this first phase,” she added.
Seen as a sign of thawing relations between London and Harare since the fall of the former president in November last year, the South African banking group believes that more funding could be availed for on-lending to a private sector asphyxiated by funding constraints.
Evidence of the risk of lending to Zimbabwe plummeted with the departure of the previous administration, Nick O’Donohoe, the chief executive of CDC, said his organisation had been preparing the loan facility since ex-president Mugabe was replaced by his former deputy.
Generally, Zimbabwe was considered a pariah state and risky borrower on global markets, including the African Development Bank, International Monetary Fund and the World Bank, which ceased extending financial support at the turn of the century in 2000s.
Acute shortage of forex has also resulted in local companies and institutions failing to make external payment on time, which saw the backlog for such obligations growing to over half a billion dollars by September 2017.
With Zimbabwe experiencing insignificant inflows of foreign currency from exports and negligible foreign investment, amid a wobbling economy and limited access to external lines of credit, industrial capacity utilisation has staggered well below 50 percent since 2009.
The Southern African country uses a basket of currency, dominated by the US dollar and with most major sources of foreign exchange sneezing, private sector has struggled to secure foreign currency to sustain, recapitalize and increase industrial production.
As such, most companies have had to either close shop or scale down, which has also contributed to limited growth in export earnings with old and antiquated equipment making production inefficient and uncompetitive compared to products from foreign markets.
