The African Export-Import Bank (Afreximbank) has said some foreign investors have used its fund which guarantees investments into Zimbabwe in a major boost for the country’s efforts to lure foreign direct investments (FDI).
The facility, the Zim Open initiative, also covers those that wish to deposit their money into Zimbabwe.
Last year, Zimbabwe and Afreximbank signed a memorandum of agreement for a facility valued at US$1,5bn to provide guarantees to foreign investors that their investments are safe buttressing President Emmerson Mnangagwa’s ‘Zimbabwe is Open for Business’ call.
Afreximbank president Benedict Oramah told Business Times on the sidelines of the bank’s annual general meetings in Russia last week that a number of investors have used the facility.
“We have a sizeable country limit for Zimbabwe and the people who need it are using them as we speak but as you can imagine some of the facilities are confidential, I cannot start naming people but we have a substantial limit for Zimbabwe. Part of it has been used,” Oramah said.
The unveiling of the facility also coincided with a jump in FDI inflows to US$745m last year from US$349m in 2017 on the back of reforms undertaken by government to lure FDI to help reboot the economy. This is the highest haul in over a decade.
FDI has been giving Zimbabwe a wide berth over the years due to policy inconsistencies and red tape. Government has moved to create a favourable environment for investors by announcing that the empowerment legislation—that prescribed that locals should have at least 51 percent shareholding in all business operating in Zimbabwe—will only be applicable to diamond and platinum sectors.
Government has also established the Zimbabwe Investment Development Agency, a one-stop shop for investors meant to cut on the red tape in acquiring permits and licences.
The investment guarantee fund was mooted by Afreximbank as a way of de-risking eligible inward investment into Zimbabwe, catalysing trade finance inflows and increasing the availability of US dollar liquidity in order to assure investors of more predictability in exit possibilities and terms.
“As Zimbabwe opens its doors to business once again, many entrepreneurs and potential investors seem eager to join the party, but their enthusiasm is often constrained by risk considerations,” Oramah told a “Doing Business in Zimbabwe” session at the Africa CEO Forum in Abidjan last year.
The Cairo-headquartered bank has been Zimbabwe’s all-weather friend, providing facilities for the importation of essential goods like fuel and has also provided a facility for industries to retool.
Zimbabwe has been weighed down by the perceived risk which has seen into an increase in the cost of money into Zimbabwe. Afreximbank believes the perception of risk that people see will go away.
Afreximbank has become Zimbabwe’s all-weather bank, disbursing facilities to help with foreign payments and importation of raw materials and key inputs.
In the past 20 years, Afreximbank has disbursed more than US$7bn to Zimbabwean entities in the public and private sectors without suffering any credit losses.