NDAMU SANDU IN CAIRO EGYPT
Zimbabwe’s largest commercial bank by deposits, CBZ Bank, has drawn down more than 60% of the US$28.2m facility it signed with Afreximbank meant to provide offshore foreign currency for local exporting firms.
The US$28.2m facility was signed on the sidelines of the Intra African Trade Fair 2021 in Durban.
The dual tranche facility will see the bulk of the money going towards capital expenditure and the remainder to trade finance, a senior bank official told Business Times.
“The facility is more than 60% drawn down. The balance is in the final stages of documentation and should be done in the next two months,” he said.
The beneficiaries for capital expenditure are in mining and manufacturing and they will have increased capacity to be able to export.
“This capex [capital expenditure] is additional capacity created, basically it is expansion,” he said.
The official said the trade finance component will cover pre and post shipment finance to bring in raw materials, value add and export.
Two companies have accessed the facility for capex which has been drawn down fully. Three companies will be accessing the facility for trade finance, the executive said.
For the capex tranche, there is a 1-year grace period and payment is expected to come through next year.
He said the plant and equipment is now on shore with commissioning expected by the end of the year.
The capex tranche has a tenure of 5 years but payable in 4 years as there is a grace period, the executive said.
Local banks have been scouring for long term lines of credit for on lending to the productive sectors of the economy which require patient capital.
This comes as the foreign currency auction system has not been able to cater for the needs of companies. The auction is allotting an average of US$25m per week.
Bank deposits are short term in nature meaning that local banks cannot lend using tbe same deposits.
They have to seek offshore credit lines.
However, the perceived country risk has made it difficult for local banks to access credits lines.
Where the credit lines are available, they have come at cost after factoring in the perceived country risk.
Local firms want to retool and expand capacities ahead of the full operationalisation of the African Continental Free Trade Area which will make Africa a single market, the biggest trading bloc after the creation of the World Trade Organisation.
Recently, the European Investment Bank advanced credit lines to two local banks amounting to €25m.
The bank is in talks with four local lenders for lines of credit to boost companies.
