15 July 2018

Zimbabwe: AfDB Signs Agreements With Zimbabwe Firms

The African Development Bank (AfDB) has signed two non-disclosure agreements with Zimbabwean companies,which pave the way for the sharing of information amid optimism the bank would disburse funding to the private sector.

The agreements were signed when a high-powered AfDB delegation visited the country last month and hosted a dialogue meeting with the private sector players.

Abdu Mukhtar, director of Industrial and Trade Development at AfDB, told Standardbusiness in Abuja last week that the signing of the agreements was a key step towards the bank's investment in the private sector.

"We had bilateral meetings with those companies. I signed two non-disclosure agreements (NDAs).

"NDA is the first step in sharing information with a potential project owner as a way of financing the project as it goes forward. I personally signed two in three days," he said.

NDAs outline confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to or by third parties.

"What this means is that we are actively looking at those projects. We have already shared information and received information from these guys, we are going to appraise those companies, projects and come back with a proposal on how we can invest in those companies," Mukhtar said.

Last month, the bank hosted a private sector development roundtable forum amid optimism the Abidjan-headquartered bank would finance the private sector, which is key for the growth of the economy.

Zimbabwe cannot access funding from AfDB as it owes the bank $601 million.

Government is in negotiations with the bank and other creditors such as the World Bank and the Paris Club to extinguish the debt and unlock new lines of fresh capital required to reboot the economy.

Analysts say Zimbabwe requires long-term cheap funding to repair the economy, battered by years of financial indiscipline and populism.

Banks cannot offer long-term loans due to the short-term nature of deposits, meaning they have to seek funds offshore.

The perceived country risk, by virtue of Zimbabwe owing everyone north, west, east and south, means that lines of credit secured come at a high cost thereby increasing the cost of production and making local products uncompetitive on the international market.

Despite the high cost of money, virtual all the sectors require a huge budget.

Confederation of Zimbabwe Industries president Sifelani Jabangwe told the visiting AfDB team that the manufacturing sector requires $2 billion to kick off all the sub-sectors.

Zimbabwe is hamstrung and has to pay for imports on cash basis.

The situation is unsustainable with Bankers' Association of Zimbabwe president Webster Rusere last month telling the AfDB team of the need for letters of credit underwritten by the bank.

The mining sector requires $11 billion for greenfield and brownfield projects.

The Chamber of Mines has said at least $900 million is required for the gold sector alone which would see output jumping to 100 tonnes in 12 years from the 30 tonnes projected this year.

AfDB has been warming up to Zimbabwe and in March gave CABS $25 million for on-lending to the productive sector, the second time the bank has advanced money to the private sector in seven years since the $8 million loan given to Lake Harvest in 2011.

Mukhtar said his team was pleased with the visit to Zimbabwe and had communicated findings to senior management of the bank.

"Everybody is happy. It will reinforce what we have said that the African Development Bank is willing to re-engage with Zimbabwe," he said.

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