No takers for US$300m industry loan facility

Oliver Kazunga

The US$300 million facility availed by a South African-based financial services firm, Loita Capital Partners in partnership with the Confederation of Zimbabwe Industries (CZI) to help the local manufacturing sector access financial support, has found no takers.

Under the facility, the cost of the funds ranges between 1 percent and 2 percent of the amount borrowed to be paid between 30 and 90 days while the agricultural sector has a payback period of six months.
Companies can access up to US$10 million from the pool facilities depending on them fulfilling all the requirements including collateral that is based on the firm’s trading history.

The US$300 million funding which was launched at the CZI annual congress in Harare last year, is split into two with US$200 million set aside to support supply chain financing while US$100 million is for value chain needs.

In an interview, CZI president, Kurai Macheza, said the disbursement of the facility has not worked smoothly as was expected.

“I think the challenge we have is the guarantor or the guys who were availing that facility have had also challenges. Remember it was an online firm-to-firm on a digital platform basis. So, it has not worked as smoothly as we would have expected.

“Firms are still applying with what has developed over time because of the challenges that were there at that stage… the dollarisation that was a bit weaker and the deepening of dollarisation, some firms have not pursued that facility vigorously, so up to now there are no takers,” he said.

So far, official data show that over 70 percent of the local transactions were being done in United States dollars and CZI has implored authorities to pull all the stops to save the Zimbabwe dollar from the second round of extinction.

The local currency was first made redundant in February 2009 when the country recorded hyperinflation in 2008.

While Zimbabwe managed to reduce inflation drastically when it dollarised, it eventually faced acute shortage of the greenback around 2016, which forced it to introduce surrogate currency, bond notes and coins, at par with the United States dollar.

Further challenges of the US dollar liquidity resulted in Zimbabwe absolutely separating the currencies deposits as banks struggled to match the balances of the surrogate currency (bond notes/coins) with the actual greenback.

CZI, which is Zimbabwe’s biggest industrial representative body, in 2018 indicated that US$1,7 billion was required annually by the manufacturing sector for retooling.

Recently, local manufacturers were affected by supply chain disruptions caused by the Covid-19 pandemic and the Russia-Ukraine war as well as the legacy debts owed to foreign suppliers that amounted to US$3,8 billion when the Zimbabwe dollar was re-introduced in 2019.

At the time, authorities directed firms to transfer balances at 1:1 to the Reserve Bank of Zimbabwe.

Against this background, local producers also struggled to access raw materials as suppliers demanded cash upfront due to the blocked funds.

This meant manufacturers had to operate on cash business, a mammoth task taking into account the obtaining liquidity squeeze.