Nelson Gahadza
ZIMBABWE’S local banks have of late been receiving lines of credit and facilities from regional and international financial institutions, which have largely been deployed to key export economic sectors.
Experts contend that the international banks are becoming more comfortable with Zimbabwe’s credit risk, improved perception and the open-for-business mantra.
Currently, CBZ Bank has facilities with institutions such as the African Development Bank (AfDB) and Trade and Development Bank (TDB) valued at over US$175 million. NMB Bank, CABS and First Capital Bank have facilities with different financiers globally.
TDB is an investment-grade African regional development finance group with the mandate to finance and foster trade, regional economic integration and sustainable development. With an asset base of US$10 billion, TDB Group has 25 African member states, which, along with non-regional member countries and institutional investors from Africa, Europe and Asia, form TDB’s community of shareholders.
Last week, the group extended a US$20 million revolving line of credit to CBZ Bank aimed at supporting eligible customers in the export sectors.
At the signing ceremony in Harare, TDB chief executive officer Mr Michael Awori said his organisation, as a wholesale bank, has the goal of supporting member states and ultimately the financial sector to accomplish their financial and strategic objectives.
“With regional offices in Harare, the success of the group is going to depend on partners on the ground who have shared commitment around delivering impact into the communities that we live and operate in, and that is why we have partnered with CBZ. Again, the decades of our relationship are a testament to that, and we have over the years extended facilities of over US$200 million to CBZ and look forward to more years of collaboration.”
Investment analyst Mr Batanai Matsika told The Sunday Mail Business that the banks are also looking for growth opportunities, of which Zimbabwe’s economy has shown potential.
“The first thing driving the international financiers is about improved perceptions on international risk; the agenda for Zimbabwe is open for business, something that has been slowly accepted, and that’s opening up businesses, and even new banks are coming in to explore new opportunities,” he said.
He added that banks are also looking for growth prospects, and Zimbabwe is promising.
He noted that, while the Gross Domestic Product may be low compared to other developed or emerging markets, it has great potential from a banking sector point of view.
“Banks invest in strategic sectors of the economy, and there are strategic sectors that are exhibiting good potential for growth, such as agriculture and horticulture exports, and actually attracting international banks, and these credit lines are opening up targeting businesses that can export,” said Mr Matsika.
However, he noted that most of the facilities are short-term; hence the authorities should address the uncertainty around the multicurrency system.
“The multicurrency system, in terms of the law, is up to 2030, so from now, the banks are looking up to five to six years, and beyond that, they are not sure, and that uncertainty limits the facilities to go beyond.
“What needs to be done is to revisit the currency system and offer what is going to be the currency beyond 2030,” said Mr Matsika.
CBZ Holdings chief executive officer Mr Lawrence Nyazema said the US$20 million from TDB is certainly going to benefit the entire economy.
“We are aware that TDB is also looking at another indirect transaction to support one of our customers that we have already supported at CBZ, but because they need more capital, TDB, along with other international lenders, is looking at supporting that company in the mining sector. We look forward to working with you both directly and indirectly.
“Our promise to TDB is to ensure the money goes for its intended use and the economy grows to a higher level than where it is currently,” he said.
Economist Mr Persistence Gwanyanya, who is also a member of the Reserve Bank of Zimbabwe Monetary Policy Committee, said the financiers are warming up to Zimbabwe, and evidently there has been an improvement, especially on reforms that the Government has been implementing.
“We are seeing a lot of opening up as the economy has been improving, with opportunities opening up in response to Zimbabwe’s open-for-business mantra. Infrastructure is improving and the economy has been growing on the measure of stability,” he said.
Mr Gwanyanya said the new currency, Zimbabwe Gold (ZiG), backed by gold and other minerals, has inspired confidence internationally, and the markets have embraced the unit.
“The environment continues to attract the external world, and Zimbabwe is largely an unexplored country,” he said.
Another analyst, Mr Enock Rukarwa, said developmental finance partners consider various factors when extending lines of credit over and above market risk and country risk.
He said the overall high-level primary mandate for these institutions is poverty reduction, inclusive growth and social development. These financial partners, he added, also promote regional economic integration, fostering cross-border trade and investment.
“Local deposit mobilisation is constrained on account of informalisation, financial disintermediation and inefficient pricing in key markets like money markets and the foreign exchange market,” he said.
