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Harare - The British government has for the first time in over 20 years extended a direct commercial loan deal to Zimbabwe.
In partnership with Standard Chartered Bank, the UK government will provide $100m to be loaned to the private sector in Zimbabwe.
Zimbabwe is reported to have last accessed British funding 20 years ago after relations turned sour, following the country’s chaotic land reform programme which displaced farmers, most of whom were of British origin.
The aftermath saw the UK government and its allies imposing sanctions on the Zimbabwean government, then led by former president Robert Mugabe.
Zimbabwe’s new President Emmerson Mnangagwa, appointed following the forced resignation of Mugabe, has however been on a re-engagement drive to mend relations with the international community, including the British government.
Zimbabwe has for years struggled to obtain medium- to long-term international funding and the latest credit facility, according to Reserve Bank of Zimbabwe governor Dr John Mangudya, goes a long way towards improving the competitiveness of companies.
Mangudya told state mouthpiece The Herald that over the years “there has been a deficit of medium-term funding which was not forthcoming to Zimbabwe.
“This is going to improve the competitiveness of the industry in Zimbabwe in terms of retooling and improvement of productivity.”
Offshore loans have for long been difficult to access by Zimbabwean companies and in cases where they have been available, the costs have been prohibitive and the terms very short.
This is in addition to foreign currency challenges that have seen most companies struggling to convert bank balances into real cash or for export purposes.
The CDC, Britain’s development finance institution, is however coming in and will share the default risk on loans to provide foreign exchange to Zimbabwean businesses struggling to operate.
CDC chief executive Nick O’Donohoe said his organisation has been preparing the loan facility since the day Mugabe was replaced by Mnangagwa.
He added that the planned loans are for the private sector and do not represent an endorsement of the Mnangagwa government.
“Without US dollars, businesses cannot pay for spare parts or inputs,” the CDC said, adding that even those still running are operating at as little as 20% capacity.
The CDC and Standard Chartered are finalising the list of companies that will access the loans, which is likely to focus on the food processing, manufacturing and agricultural sectors.
