AfDB boost: Zimbabwe businesses to benefit from US$25m line of credit
ZIMBABWEAN companies including small to medium enterprises (SMEs) are expected to benefit from the US$25 million line of credit facility recently extended to the Central Africa Building Society (CABS) by the African Development Bank (AfDB) Group to boost production and trade.
The regional financier’s board of directors announced the approval of the trade finance package last Thursday and hopes this will go a long way in capacitating local firms.
In a statement, the AfDB said the facility will, in particular, enhance foreign currency liquidity support for the building society amid a tough economic climate in Zimbabwe.
The facility will cover some of the trade finance gaps developed mainly due to international lenders who have scaled down or halted their trade transactions due the adverse perception of Zimbabwe as a high-risk jurisdiction, it added.
Ms Moono Mupotola
Negative perception about Zimbabwe has been largely linked to the illegal sanctions imposed on the country by the United States of America and its Western allies.
The facility, which would finance approximately US$175 million of trade over a three-and-a-half-year period, marks the AfDB’s fourth private sector intervention in Zimbabwe in recent years and the third to the building society.
“DFI collaboration is key to private sector development in Africa. This innovative facility will enable CABS to provide liquidity support for SMEs, and women-owned businesses to facilitate their import and export trade finance requirements,” head of trade finance at the AfDB, Lamin Drameeh, said.
According to the bank, the facility will complement the recently approved Transaction Guarantee Facility for US$7,5 million to ensure support along the value chains of SMEs and local corporate businesses in Zimbabwe.
“It is expected to boost the relatively low productivity of Zimbabwe’s SME sector, creating jobs and indirectly improving Government revenue through taxes from increased economic activity in the sector,” said the AfDB.
Speaking soon after the board approval last week, AfDB country manager for Zimbabwe, Moono Mupotola, described the line of credit as a strategic milestone expected to have an important demonstration effect, which may prove vital to encouraging other international and regional lenders to offer additional support to the country’s private sector.
The AfDB currently supports 13 initiatives in Zimbabwe valued at US$144 million. These include initiatives to improve governance and public finance management in the public sector.
Other bank-supported projects involve supporting women and youth to enable them to engage in value addition in agro-based and mining value chains.
The bank has also been supporting the rehabilitation of key regional and national energy projects, including energy reform technical assistance to support Zimbabwe’s transition to climate-smart energy solutions.
Further, the AfDB supports Zimbabwe’s private sector through regional financial institutions that operate and invest in the country.
The AfDB established the Trade Finance Programme (TFP) in 2013 with the main objective of reducing the trade finance gap in Africa by complementing the activities of private sector actors and regional institutions already active in trade finance.
The trade finance division offers trade finance through the provision of risk mitigation facilities, liquidity, equity and technical assistance to financial institutions and commodity aggregators.
The bank’s trade finance instruments include trade finance lines of credit, risk participation agreements, transaction guarantees and soft commodity finance facilities.
Alongside these, the AfDB seeks to support eligible counter-parties with equity investment and technical assistance.-chronicle
