Zim tackles perceived country risk

"The employers have had to expend huge sums of money on sick leave payments, medical aid costs, funeral costs, recruitment and retraining costs." — Minister Bimha

Prosper Ndlovu Business Editor
THE government is finalising a deal with the African Development Bank (AfDB) to enable Zimbabwe to subscribe to the African Trade Insurance (ATI), which is going to reduce the country’s perceived risk factor and open doors for more investment.Industry and Commerce Minister Mike Bimha yesterday said the government was seized with the issue and that significant progress had been made.

ATI is Africa’s export credit agency providing political risk and trade credit risk insurance products with the objective of reducing the business risk and cost of doing business in Africa.

Gaining membership of the organisation would protect the country’s economy against losses caused by credit and political risks and help local companies compete globally while attracting foreign direct investment.

“We’re finalising that with AfDB and the Ministry of Finance and a lot of progress had been made. We’ll be making an announcement soon,” said Bimha.

“We’re excited with this development because it will tackle the perceived country risk, which is one of the reasons why we can’t access money from lenders. Once this is concluded it will open more doors for investors.”

The AfDB has pledged financial support for Zimbabwe to subscribe with ATI.

Studies have shown the perceived country risk to be one of the major drivers of interest rates and lack of credit lines to businesses.

For the past decade Zimbabwe has been struggling to access lines of credit from international financiers because of the perceived country risk induced by the illegal imposition of economic sanctions by the West.

Cabinet has also come up with resolutions in redressing the financial sector that include the proposed setting up of a credit rating bureau that will benefit all financial institutions and that urgent measures be crafted to plug currency leakages.

Minister Bimha said his ministry was pushing for the speedy implementation of such industrial reforms in line with Cabinet recommendations on enhancing domestic competitiveness and reducing the cost of production.

“The recommendations were approved by Cabinet and right now we’re looking at processes of rebranding our Incomes and Pricing Commission.

“But before that my ministry will continue doing that work. Cabinet also approved setting up of a ministerial standing committee that will periodically make contributions on issues of competitiveness,” he added.

Joining ATI is expected to help increase investment in the country and foster two-way trade flows between Zimbabwe and the world.

The organisation also facilitates exports, foreign direct investment into and trade flows within the continent.

ATI was launched in 2001 with the financial and technical support of the World Bank and the backing of seven African countries.

Since 2003 the organisation has supported over $13 billion worth of trade and investment across the continent, securing an investment grade rating of ‘A’ from Standard & Poor’s, and gain expanded membership with plans to attract even more African member countries and international financial institutions in the near term.

Presently the organisation has been able to conduct business in countries such as Benin, Burundi, DRC, Kenya, Madagascar, Malawi, Rwanda, Tanzania, Uganda and Zambia.