Cheaper, long-term loans to support productive sectors

THE Government is prepared to facilitate significantly low interest rates and long tenures on all the funding facilities that the Treasury will be introducing to support the various productive sectors of the economy.

Finance and Economic Development Minister Professor Mthuli Ncube said this while responding to questions from the floor at the end of the three-day Confederation of Zimbabwe Industries (CZI) annual conference that ended in Harare on Friday.

The funding facilities include the US$15 million industry support fund to be introduced by the Government, which would be drawn from the Special Drawing Rights funds Zimbabwe received from the International Monetary Fund (IMF).

Last year, the IMF allocated Zimbabwe US$958 million as part of a General Allocation of US$650 billion that was released globally to the multilateral institution’s member countries.

Prof Ncube recently launched a US$30 million Horticulture Export Revolving Fund supported by the SDRs, which is expected to close the funding gap for producers, increase productivity and greatly assist entities with bias on value addition.

Through resources such as SDRs, the Treasury is targeting strategic sectors such as horticulture expansion and value addition.

“And you ask about the support for industry in terms of lower interest rates and longer term funding.

“I am listening, what l will do is to engage the banks that are on that retooling fund and see to what extent they can stretch the tenure of the loans and also what interest rate we could peg them at, which will be actually lower than the marketing rate.

“So, I am going to do that actually with all the facilities that we are putting together as Government,” he said.

Prof Ncube said the SDRs disbursement amounting to US$145 million will be channelled towards a number of priority sectors including investments in social sectors (Health (US$35 million and Education (US$10 million); agriculture support (US$30 million) and small holder farmer irrigation schemes (US$20 million); industry support- (retooling), infrastructure development (housing development US$10 million) and gold centres (US$10 million).

One of the major challenges constraining the local industry from increasing production to optimum levels relates to funding largely needed for retooling and procurement of critical raw materials.

Prof Ncube said the Government would also look at protecting the agriculture sector amid concerns that the sector was also facing competition that was uncalled for through some imports that were flooding the local market.

“On agriculture imports you would want basically to be protected as a local producer on some of the agricultural raw materials.

“If there is a local producer who is able to produce the same commodity, why import that commodity?

“As Government, we should think carefully about protecting local industry because we are protecting jobs at the end of the day.

“I totally agree with that and l will engage the Minister of Agriculture to see which areas we should be closing off,” said Minister Ncube.

The agriculture sector is one of the major economic mainstays contributing to the Gross Domestic Product and the fiscus through employment creation and foreign currency generation, among other fundamentals.

On why the Reserve Bank of Zimbabwe was allocating foreign currency when the country had so many commercial banks, Prof Ncube said: “Our banking sector is dual in nature in the sense that we have got mainly the locally-owned banks and then foreign-owned banks, and the two groups don’t trade with each other either for domestic currency purposes in terms of settling their positions overnight or foreign currency purposes in terms of determining the price of our exchange rate or value of money.”

“So, because of that problem, we find that the Central Bank then has to play an interlocking role.

“For example, if one of the foreign banks is long overnight and a domestic-owned bank is short, the Central Bank will use zero percent NCD (Negotiable Certificates of Deposit) to mop-up that excess liquidity from the foreign bank and literally pass it on to the local bank overnight,” said Prof Ncube.-herald.cl.zw