Afreximbank guarantees Zim investments

Ndamu Sandu

The African Export and Import Bank (Afreximbank) has provided a guarantee fund which provides insurance cover to foreign investors in a massive boost to Zimbabwe’s efforts to attract foreign direct investment (FDI).

Afreximbank president and chairman of the board Benedict Oramah said the insurance on foreign investments would be provided under the Zim Open which will protect FDI that comes into Zimbabwe.

“We are working with government on what is called Zim Open initiative.  It is meant to protect foreign direct investments that come into Zimbabwe. We believe that it is easier for investments to come especially immediately after elections so that we do not have a long time between elections and when people start seeing the dividends of the new dispensation we have,” Oramah.

The guarantee was discussed when Oramah and his team paid a courtesy call on President Emmerson Mnangagwa in December in which Afreximbank pledged to support Zimbabwe.

FDI has been giving Zimbabwe a wide berth due to policy inconsistencies and an unstable political environment. However, President Mnangagwa has been singing the Zimbabwe is open for business hymn. Government has also tweaked the empowerment laws making the 51:49 percent threshold only applicable to diamond and platinum. Before the review, the legislation was blamed for scaring away foreign investors.

Reserve Bank of Zimbabwe (RBZ) governor John Mangudya told Business Times last night Afreximbank was underwriting risk to give comfort and confidence to would be foreign investors which will encourage them to invest in Zimbabwe.

“It is an insurance cover for foreign investors so that they will invest in Zimbabwe. It is supporting the openness of the Zimbabwean economy,” Mangudya said.

“It means that Zimbabwe is indeed open for business. It’s a seal of approval to Zimbabwean investment policies and those investors sitting on the fence should grab this opportunity.”

Oramah said Afreximbank had availed facilities for banks to support the importation of essential raw materials required in the economy. The bank, he said, was also working on facilities for the importation of fuel and making sure that companies are “retooled as quickly as possible to provide employment”.

The bank has in the past provided funding for retooling under the $70 million Zimbabwe Economic and Trade Revival Facility.

Oramah said the bank was finalising the disbursement of $450 million under the $600 million syndicated facility for Zimbabwe.

The proposed guarantee on foreign investments comes as the Cairo-headquartered bank has to date provided facilities amounting to $4 billion to support the economy in line with its thrust to bring positives to the lives of our people.

“Little wonder that your bank stood shoulder to shoulder with Zimbabwe as it went through its economic difficulties, providing about $4 billion in cumulative support to date since its difficulties and which kept food on the tables of the poor, kept power stations running, prevented the banking system from collapse and kept export industries operating,” he said.

Afreximbank has been Zimbabwe’s all weather lender. It guarantees the $200 million export incentive facility introduced in 2016 to grow export receipts. An additional facility of $300 million came on board to grow the export base. The Reserve Bank of Zimbabwe says the export incentive facility has seen a 36% growth in exports to $3,8 billion last year from $2,8 billion in 2016.

In 2014, the trade finance bank launched the Afreximbank Trade Debt-backed Securities (Aftrades), a $100 million facility and associated instruments aimed at alleviating the liquidity challenges confronting the financial sector.

Aftrades became operational in 2015 and has been used by RBZ as a lender of last resort window and for promoting interbank finance facility. The facility was established at a limit of $200 million and was hailed for alleviating liquidity shortages in 2017. It was extended to February 2019.  In his monetary policy statement, Mangudya said total trades amounted to $399,5 million last year.

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