22 March 2019

Zimbabwe: U.S.$50 Million AfDB Loans for Private Sector

THE African Development Bank (AfDB) says it will inject US$50 million in loans into Zimbabwe's private sector this year, although the country is yet to settle its US$600 million debt to the regional lender, the Zimbabwe Independent can report.

This comes after the finance house extended US$25 million last year to support local industries to retool and expand operations.

With Zimbabwe gripped by an intractable economic crisis, characterised by a severe shortage of hard currency, local industries have been battling to import key raw materials as well as expand operations. Over 50 companies have shut down this year, while those still afloat face the gloomy prospect of winding down operations, amid an unrelenting economic crisis.

In January, when the foreign currency crisis became more pronounced, the Confederation of Zimbabwe Industries (CZI) alerted government that most firms could shut down in 30 days, if a rescue package was not put in place.

Government was prompted to swiftly intervene with a US$400 million facility in the form of letters of credit to avert the imminent collapse of the country's fragile manufacturing sector.

Although Zimbabwe's debt has exponentially risen to US$18 billion since President Emmerson Mnangagwa took over from Robert Mugabe, who was toppled in a 2017 military coup, AfDB has not frozen lines of credit to the country's distressed industries.

AfDB country manager Damoni Kitabire this week told the Independent that the regional financier would soon be making disbursements to deserving firms with viable projects from the US$50 million it will channel towards supporting the private sector.

"Last year, we extended a US$25 million line of credit to the Central African Building Society (CABS) which they on-lend to the agriculture sector and manufacturing firms for importation of inputs and machinery and, in particular, to export-oriented activities which the bank believes will help the country to earn the much-needed foreign currency.

"There are various lines of credit AfDB is considering for the Zimbabwe private sector up to a limit of US$50 million this year," Kitabire said, noting that the bank was prioritising agriculture and the manufacturing sector.

Firms with viable projects as well as capacity to produce and export would also be prioritised under the loan facility, whose disbursement will commence "soon" once a firm satisfies all requirements.

"Disbursements will occur soon after appraisals and satisfying necessary conditions and signing of agreements," he said.

Last year, Kitabire told the Independent that the regional lender would channel US$223 million in grants to Zimbabwe's private sector over the next three years --though public sector lending would only resume after Zimbabwe has extinguished its huge debt stock.

Industries require at least US$200 million every month to meet import requirements.

Manufacturers have been battling with raw material backlogs in excess of US$480 million as at December 2018, with fears looming that a number of companies in sub-sectors such as oil pressing are on the brink of collapse.

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