The United Kingdom and the Standard Chartered Bank have partnered to lend Zimbabwean companies in the private sector US$100 million in a move described by Government as a sign of confidence in its policies aimed at transforming the economy into a middle income by 2030. Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya confirmed the development saying the facility would go a long way in improving the firms’ competitiveness.
This is the first direct commercial loan to Zimbabwe by the UK government in over two decades. “This is a significant move in that it is a medium-term facility to be used for the revival of companies in Zimbabwe,” said Dr Mangudya.
“There has been a deficit of medium-term funding which was not forthcoming to Zimbabwe. This is going to improve the competitiveness of the industry in Zimbabwe in terms of retooling and improvement of productivity.”
Dr Mangudya added: “More importantly, it is a sign of confidence that the international community has found in Zimbabwe. It is a seal of approval or endorsement of Government policies and measures aimed at transforming the economy into a middle income by 2030.
“From the RBZ side, we are pleased by this facility because it will increase exports by Zimbabwean companies.”
The CDC, which is the UK’s development finance institution, will share the default risk on loans to provide foreign exchange to the Zimbabwean businesses.
CDC chief executive Mr Nick O’Donohoe said they had been preparing the loan facility from the day former president Mr Robert Mugabe left office.
“We think it’s pretty significant,” he said. Mr O” Donohoe said the last direct CDC loan to Zimbabwe was to a fish farm in 1994. “We are not aware of any commitments that have been made by anybody since the change of government,” he said.
This comes at a time when President Mnangagwa had promised to hold credible elections. It is understood that the CDC and Standard Chartered are finalising a list of companies that can access loans.
Companies in food processing, manufacturing and agricultural sectors are likely to benefit. The loan will be for up to three years and can be used for capital expenditure or working capital.
“Zimbabwe’s economy has been shattered over the last two decades, yet holds real potential,” said Mr O’Donohoe.
“If a new government in post-election Zimbabwe encourages investment and pro-business policies, Zimbabwe can be one of the great investment success stories of the next decade.”
Mr Sunil Kaushal, regional chief executive of Standard Chartered Bank, said the loan facility was similar to that of a previous partnership with the CDC when the two lent to Sierra Leone at the height of the Ebola epidemic in 2015.
President Mnangagwa’s administration is on a mission to turn around the economy by opening up the country to Foreign Direct Investment (FDI). The President is also fighting corruption which was rampant during the Mugabe era and frustrated efforts by some investors to come to Zimbabwe.
President Mnangagwa also wants to ease the doing of business in the country by ensuring that potential investors are attended to within the shortest period of time.
The country has attracted over $11 billion in FDI pledges ever since President Mnangagwa took over from Mr Mugabe and is on a positive economic trajectory expected to create employment.