Companies and other organisations may source funding from within and outside the country to meet establishment costs, growth and working capital requirements.
Funds may be raised in form of debt (loans) and equity (shares) from multilateral financiers and partners resident in and/or outside Zimbabwe.
Offshore loans and equity should be registered with the Reserve Bank of Zimbabwe (‘the RBZ’) as a requirement of law.
The Exchange Control Unit of the RBZ administers the Exchange Control Act Chapter 22:05 (hereinafter ‘the Act’) and the related Statutory Instruments 109 and 110 of 1996.
The Act empowers the President to issue regulations relating directly or indirectly to transactions relating to debts under section 2(1)(iv).
Statutory instrument 109 of 1996 issued in terms of the Act deals with payments outside Zimbabwe under section 11.
Exchange Control regulations on local residents.
According to the statutory instrument section 11(1), no Zimbabwean resident shall, unless otherwise authorised by Exchange Control:
(a) make any payment outside Zimbabwe; or
(b) incur any obligation to make a payment outside Zimbabwe.
Exceptions apply under section 2, which states that Subsection (1) shall not apply to:
(a) any act done by an individual with free funds which were available to him at the time of the act concerned; or
(b) any lawful transaction with money in a foreign currency account.
Exchange Control regulations on foreigners.
Foreign residents carrying on any trade, business or other gainful occupation or activity in Zimbabwe are governed by section 11(3) which prescribes that such may not:
(a) make any payment outside Zimbabwe; or (b) incur any obligation to make a payment outside Zimbabwe; in respect of that trade, business, occupation or activity.
Exceptions apply under section 4 which states that subsection (3) shall not apply to any lawful transaction with money in a foreign currency account.
Offshore (external) loans registration
Offshore loan registration with RBZ’s Exchange Control Unit is done through your authorised dealer (bank).
The loan agreement together with the following documents should be availed to the RBZ’s External Loans and Exchange Control Review Committee (hereinafter ‘ELECRC’) to enable registration:
λ Instruction to register the loan, which should be on company letterhead
λ Completed term sheet (as prescribed by your dealers to meet RBZ requirements)
λ Board resolution agreeing to register the loan
λ Projected cash flow statements (to cover whole period of loan tenor and to accommodate provisions for loan repayments)
λ Proof of drawdown i.e. bank statement, bill of entry or swift in messages (applicable if a drawdown has been made)
λ An account of the shareholding structure of the organisation
λ Prior year Financial statements
λ An account all current borrowings (both local and offshore)
λ Support letter from the parent ministry if applicant is a parastatal
The interest on external loans is guided by the RBZ which accepts the London Offered Interbank Rate (LIBOR) as base rate.
In addition, interest rates, commitment fees and other flat fees should be in line with the ELECRC offshore loans registration guidelines as outlined below:
Pricing of external loans
(All charges per annum except
L/C Confirmation fees)
Tenor
1 Year and less
Between 1 year and 2 years
Between 2 years and 5 years
Between 5 years and 9 years
Above 9 years
Margin Above Reference Rate of up to (p.a) 6% 7% 8% 9% 10%
Commitment Fees (Only for committed lines) 1% 1% 1% 1% 1%
TOTAL MARGIN 7% 8% 9% 10% 11% L/C Confirmation Fees (per quarter) 1.5% 1.5% 1.5% 1.5% 1.5%
TOTAL FOR FLAT FEES 4% 4% 4% 4% 4%
NB: The pricing structure is subject to review by RBZ from time to time.
Fungai Chimwamurombe is a registered legal practitioner and Senior Partner at Zenas Legal Practice and can be contacted for feedback at fungai@ zenaslegalpractice.com and WhatsApp 0772 997 889.
Bhekimpilo Mangena is a Business Consultant at Zenas Consulting (Pvt) Ltd and can be contacted on 0712500490.
