Online Reporter
Nqobile Bhebhe, [email protected]
THE ability of eight local financial institutions to mobilise US$125 million for the Shamva New Project has demonstrated Zimbabwe’s growing capacity to finance large-scale mining investments and strengthened confidence in the domestic banking sector, CBZ Holdings group chief executive Mr Lawrence Nyazema has said.
Mr Nyazema said the successful financing syndication, which surpassed the initial US$75 million target, showed that local banks could collaborate to unlock capital for strategic economic projects while supporting Zimbabwe’s mining-led growth agenda.
He was speaking at the Mine Entra Suppliers Symposium in Bulawayo under the theme “Promoting Local Content through Financing Supplier Development Programmes in the Mining Industry” on Wednesday.
“My confidence comes from two major events that happened last week.
” The first one was on Thursday, where in Harare we saw eight local financial institutions coming together to finance what is going to be one of the biggest gold mines this country has seen, and that is the Shamba New Project, which is a project or which is an institution under Mutapa, our sovereign growth fund,” he said.
CBZ was tasked with arranging the financing syndication for the project, with Mr Nyazema saying the response from local banks exceeded expectations.
“So the target that was given to CBZ who arranged the syndication, was can you raise US$75 million for us?”
“But surprise, surprise, the eight banks put together US$125 million.”
“And what does that do? The extra US$50 million is going to be used to finance the Shamva New Project.”
He said the development proved that Zimbabwean financial institutions had the capacity to mobilise resources for major investments and support sectors that are critical to economic transformation.
“And what does that tell you? It tells you that there is capacity within our local financial institutions to come together and finance big projects,” he said.
Mr Nyazema said the strong showing by local banks was complemented by another major milestone, the launch of the Zimbabwe Entrepreneurship Exchange (ZEEX) in Bulawayo last week, which is expected to transform access to capital for SMEs.
“Then the second event that took place here in Bulawayo last Friday, which was led by the Minister of Finance, Economic Development and Investment Promotion, the introduction of the Zimbabwe Entrepreneurship Exchange.”
“And we are basically saying we are forming a platform and an exchange where SMEs will be able to raise capital.”
Launched by Zimbabwe Stock Exchange Holdings, ZEEX is expected to address one of the major constraints affecting SMEs, limited access to affordable finance due to lack of collateral and established credit histories.
Mr Nyazema said the platform would introduce innovative financing models, particularly for suppliers servicing major corporates in sectors such as mining.
“But when it comes to the specific topic that we are talking about, to say how can the suppliers of major corporates be assisted, the anchor financier of one of the key products that we are going to start off with is Red Square Finance, which as you know, is the microfinance unit of CBZ Holdings.”
He said the model would allow SMEs to unlock funding by leveraging confirmed invoices from established companies.
“So what has been established as the first product is to say those that have got a lot of money, they are going to be able to raise a lot of money.”
“And when you are talking about invoices and are holding by major corporates, you can now go to the transparent exchange because this one is being led by the Zimbabwe Stock Exchange.”
Mr Nyazema said enterprise supplier development would bridge the gap between large corporates, financial institutions and smaller suppliers by using the strength and credibility of established businesses to unlock financing.
“So in summary, what is enterprise supplier development? This is a financing model where we are saying reliance is placed on the creative weapon and the weight of a major corporate.”
Using mining suppliers as an example, he said businesses could discount invoices issued to reputable companies and receive funds before the agreed payment period.
“So when we look at Mutapa Gold as an example, we are simply saying as a supplier of Mutapa Gold, you have supplied services or goods.”
“And they are going to pay you, say, in 30 days, in 60 days.”
“You can now take that invoice and go to a financial institution that will discount the invoice for you, and you get value and continue with your production.”
“So reliance by the financial institution is not placed on your credit readiness.”
He said the approach would benefit emerging businesses that often struggle to meet traditional lending requirements.
“If you are an upcoming SME, chances you do not have collateral and correct trade record.”
“So ordinarily you would have gone to a bank. But I also get a lot of complaints from these SMEs who say, you tell us that collateral will not be required.”
“But when we go to our banks, they ask for collateral and that is why we have come up with this innovation of having an exchange where there’s going to be transparency in pricing, and the proper product is going to be introduced to our SMEs.”
The push comes as Government seeks to deepen local participation in mining value chains by strengthening domestic suppliers’ ability to provide goods and services to the sector.
ZEEX, together with supplier development financing models, is expected to help close the funding gap facing SMEs while promoting greater integration between mining companies, financial institutions and local businesses.
