ZIMBABWE and Botswana yesterday finally signed the agreement to start operating the 500 million pula (US$64,3 million) lines of credit to help revive distressed manufacturing firms and agriculture. The funding agreement was signed by Finance Minister Tendai Biti and Botwana's Finance Minister, Kenneth Matambo. Biti said Zimbabwe was in need of capital to rebuild industry and rejuvenate agriculture to recover from a decade of debilitating economic instability.
The manufacturing industry and agriculture each require more than US$2 billion in fresh financing per year to recapitalise operations.
"Our country needs capital in the form of Foreign Direct Investment, lines of credit and access to cheap financing," said Minister Biti.
Mr Matambo said commercial banks in Botswana had agreed to participate in the facility.
"All commercial banks in Botswana have agreed to participate in the (P500 million) line of credit, subject to a Government guarantee," he said.
Minister Biti said the grant by Botswana was part of the financial aid facilities agreed with Southern African Development Community (Sadc) countries in 2009 to assist Zimbabwe. Some of the sectors expected to benefit from the facility are energy, steel, leather, textiles pharmaceuticals and tourism. The loans range from six months to five years, Minister Biti said. The loans would be extended at concessionary rates.
Zimbabwean businesses were yet to benefit from the long-awaited 500 million pula (US$64,3 million) line of credit facility that the Botswana Government offered to Zimbabwe almost three years back.
The deal was held back due to delays that both countries had in finalising the Bilateral Investment Promotion and Protection Agreement that was drafted by Botswana.
Minister Matambo was recently quoted as saying that "the Botswana government has long approved the agreement and is ready for its signing. We have since notified the Zimbabwean Government the terms and conditions of the agreement and waiting for their input".
He added that: "It is for Zimbabwean authorities to either approve or amend the conditions that we have set" for the loan facility.
Under the terms of the agreement, the two countries agreed that the facility would cover the export of goods and services from Botswana to Zimbabwe as well as joint venture deals.
About 70 percent of the funds could be allocated to the manufacturing sector, while the remaining 30 percent would go towards other sectors of the economy.
The Botswana Confederation of Commerce Industry and Manpower, a group that represents the private sector in Botswana, last month expressed its disappointment at the pace at which the two countries were implementing the lines of credit facility.
The approval of investment protection agreements, which had stalled the facility, could result in an increase in joint ventures, equity participation, capitalisation of industry and increase in productivity of both countries.