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Golden Sibanda Harare Bureau
The United States government’s international development finance arm, Overseas Private Investment Corporation (OPIC), is set to invest up to $23 million towards low cost mortgage lending in Zimbabwe.
A seven member OPIC delegation was in Zimbabwe last week to evaluate opportunities, as co-operation between the two countries extends to economic spheres in spite of the existence of sanctions imposed on the country by the US.
The Zimbabwe Democracy and Economy Recovery Act (ZDERA), of 2001, and provisions in subsequent appropriations acts, restricts the ability of the United States to cast its vote in support of new assistance to Zimbabwe from international financial institutions (IFIs).
The law also prohibits US nationals, companies or institutions from doing business with government officials, institutions and entities classified under Specially Designated or Blocked Persons List.
The government contends that the tension with US over alleged human rights abuse and public corruption, however instigated by Harare’s land redistribution to the black majority, is stifling economic recovery.
But Finance and Economic Development Minister Patrick Chinamasa met the OPIC delegation, accompanied by a commercial counsellor from the US Embassy in Harare, at his offices last Thursday to the discuss investment in mortgage lending.
Minister Chinamasa said the discussions that took place throughout last week when the US’s OPIC delegation was in the country, evaluating two to three local banks, were serious.
“In what may be a first of its kind, a US investor has been in the country scouting for investment opportunities into long-term mortgage lending to help resolve shortages of residential housing in the country.
“They’ve already indicated that they’re going to on-lend $23 million into mortgage lending, but depending on the success of that investment, depending on the operating environment, they can intensify that investment later,” the minister said after meeting the OPIC officials.
While finer details around the terms of the mortgage facilities are still under wraps, Minister Chinamasa said the funding will be cheaper and long term; with high possibility of tenure of up to 35 years.
“Certainly, in my view from the discussion, it will be cheaper. They’re interested in long term financing. Mortgage lending is (by nature) not short term and this is money that’s being put out there for the long term and we’ve been talking here about 20, 25 to 35 years… this is what this market wants to see.”
Zimbabwe’s housing backlog is estimated at over 1,25 million and the government is targeting to provide at least 250,000 units under its medium term economic plan – Zimbabwe Agenda for Sustainable Socioeconomic Transformation covering the period 2014 to 2018.
Minister Chinamasa said the discussions with OPIC also touched on the unique fact that most houses in Zimbabwe were built for cash with no mortgage registered against them meaning “that the entire asset is a dead asset,” which can be used to expand mortgage lending.
OPIC, which supports US investors who take lucrative opportunities, especially those with high socio-economic impact in emerging markets, will fund the US investor’s foray into mortgage lending.
“Right now, they’ve come to do due diligence on a number of commercial banks. The investment will be confined to residential mortgage lending. So, they’re here to do due diligence of our commercial banks to see which ones merit their investment,” he said.
“OPIC, actually, lends funding to those US businesses that want to lend abroad, as such they’re a development bank. What they’ve indicated is that their activity here depends on demands from US investors.
“If US investors want to invest in Zimbabwe they come to support, but aren’t prompted to come here by Zimbabwean investors. They come to support US investments in this country, either in the form of joint ventures or through mortgage lending,” the Finance minister said. He said they seek a variety of investments but are keen on JVs.
Minister Chinamasa said, the initiative by the US investor, which apparently has blessings of the US government, is an important step in normalising economic relations between Harare and Washington.
“What I think we should focus and maybe concentrate on is, hopefully over time or sooner than later, that the political standoff is resolved, but right now I’m pleased that we’re beginning to see in a serious way, engagement in the economic field,” the minister said.
Online Reporter