Zim, Bots seal $64m credit facility

HARARE - Zimbabwe and Botswana yesterday signed a P500 million ($63,4 million) Credit Line Facility Memorandum of Agreement aimed at reviving the country’s ailing industries.

The conclusion of the deal comes more than three years after Botswana had pledged the funds following the formation of the inclusive government to support Zimbabwe’s Short-Term Emergency Recovery Programme (Sterp).

Finance minister Tendai Biti said the funds would be channelled towards local industries, which for a long time have been adversely affected by a liquidity crunch, high cost of borrowing  and short-term nature of credit facilities on the domestic financial market.

“It has been proven that the fastest growing economies are usually anchored by a robust industrial base and this explains why the growth of our economy has remained constrained.

“Thus this line of credit, though not a panacea to the myriad problems facing industry, is a welcome and timely intervention,” he said.

The credit facility, will also to disbursed towards reviving subsectors of tourism, pharmaceuticals, agro-processing, Information and Communication Technologies, energy, steel and leather, while supporting  joint ventures between Zimbabwe and Botswana companies and investments by its nationals locally.

Biti said beneficiaries of the credit lines will be able to acquire new machinery and equipment to replace obsolete ones.

The facility will also enable beneficiaries to meet their working capital requirements and ultimately increase capacity utilisation.

The funds which will be accessed through short and medium term funding are neither a grant from the Botswana government to Zimbabwe, or cash injection into the Zimbabwean economy, rather a purely lending business by Botswana banks to eligible business entities for purpose of revitalising economic activity in Zimbabwe with a view to achieving a mutually benefiting situation for both countries.

“Short-term funding will cover requirements of up to six months, particularly working capital, and the medium term credit will have a tenor of up to five years depending on the financial needs.

“This represents flexible facility that genuinely attempts to meet the varied needs of our industry,” said minister Biti.

Botswana minister of finance and development planning Kenneth Matambo said the credit facility would be a once-off arrangement whose continuation would be determined by adequate and beneficial implementation of the initial drawdown.

“At the end of the five-year period, there will be a review to determine whether to continue or wind up,” he said.

A delegation from Botswana led by the then finance and development planning minister Charles Tibone and Zimbabwe’s negotiating team led by Biti met in September 2010 in Gaborone, to discuss the deal.

The two governments agreed on terms and conditions of the lines of credit, which included among others, interest rates, repayment period, arrangement fees, guarantee fees and loan thresholds per project.

“It was agreed that 70 percent of the facility would be earmarked for the manufacturing sector whilst the remaining 30 percent would go towards other sectors,” Matambo said.

CZI president Kumbirai Katsande said although he was happy with the credit facility, the government must come up with sound policies that encourage investments in the country.

“We must stress that money, however, much it is cannot make up for poor economic policies. So we urge the government to keep reviewing our policies so that we are a competitive investment destination,” he said.

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