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Development Bank of China in a deal set to give impetus to the SME sector.
This is a dual tranche facility with the first of US$10 million earmarked for capital expenditure while the second tranche of US$20 million will be for working capital.
The facility attracts a 10 percent interest. The capital expenditure portion has a tenor of five years while the working capital package will mature after one year.
IDBZ said the facility would be open to all companies operating in Zimbabwe with particular emphasis on small and medium-sized enterprises (SMEs)
Speaking at the signing ceremony held in Harare yesterday, Chinese Ambassador Mr Xin Shunkang said the package, dubbed the Special Loan for the Development of African SMEs, was one of the avenues through which China intended to positively impact on African economies, Zimbabwe in particular.
“This US$30 million line of credit to IDBZ is only the beginning, bigger things will come in the near future,” remarked Ambassador Xin, who has adopted the name Cde Chakanaka Chakanaka (What is good is good) to demonstrate his love and commitment to Zimbabwe.
The unveiled facility is part of the US$1 billion package targeted for African SMEs launched after the announcement of the Eight New Measures at the Fourth Ministerial Conference on China-Africa Co-operation in 2009.
IDBZ chief executive Mr Charles Chikaura said the medium-term special loan would go a long way in assisting local companies acquire capital equipment and meet operating expenses at affordable cost.
“IDBZ intends to buttress the objectives of the establishment of this loan facility by supporting eligible Zimbabwean companies which will positively contribute to the attainment of the aforementioned objectives,” he said.
Production capacity in the manufacturing sector, under which the bulk of SMEs fall, has increased to 57 percent in the last few months, with inadequate funding highlighted as a major constraint.
The use of obsolete machinery has also emerged as an inhibition.
However, the latest financial injection is set to mitigate some of the challenges.
Over the past few years, China has emerged as a critical partner for Zimbabwe as it seeks to stabilise and grow the economy.
SMEs have been identified as the engine for economic growth, with phenomenal growth in India and China itself, largely anchored on SMEs.
The co-operation between IDBZ and CDB is an extension of the bilateral relations between the People’s Republic of China and the Republic of Zimbabwe. The relationship between the two countries’ development banks was formalised through a Memorandum of Understanding signed on September 22 2006.
Its thrust is to outline the broad framework of co-operation between IDBZ and CDB, in furtherance of the two banks’ respective mandates.
In a speech read on his behalf, the Secretary for Finance, Mr Willard Manungo, expressed profound appreciation to China Development Bank for extending the line of credit to IDBZ and expressed hope
that the facility will assist in consolidating the gains made thus far in economic recovery.
Accountant-General in the Ministry of Finance Mrs Judith Madzorera urged the two banks to be flexible in the eligibility criteria for the facility to expedite its absorption by final beneficiaries to realise the intended benefits in the economy.
IDBZ recently announced a US$30 million facility for the construction sector and other sectors of the economy as part of efforts to induce liquidity in the economy.
In July, Government, with an 85 percent shareholding, allocated US$1 million to the bank.
Online Reporter