South Africa’s Industrial Development Corporation (IDC) says it is ready to finance Zimbabwe’s projects but concerns over the ability to repatriate profits and dividends remain worrisome.
The SA IDC, self-funded since 1953, has been a key financier in bankrolling local projects. However, recent bottlenecks in taking profits beyond the country’s border due to foreign currency shortages have been a source of worry for many investors. IDC head for the Africa unit Thokoane Tsolo told Business Times on the sidelines of the just ended Confederation of Zimbabwe Industries that the regional financier is concerned over the currency situation in Zimbabwe.
IDC’s exposure to Zimbabwe is nearly R3 billion but there is scope to increase it to R5 billion.
The institution is owned by the South African government under the supervision of the Economic Development Department.
“Yes there is appetite to finance more projects in Zimbabwe for as long as they are bankable,” Tsolo said.
“We are concerned about the repatriation of profits back home but as part of the negotiations, if the answer is yes, then we will go ahead. We also go to the Reserve Bank and talk to them.
” In 2016, government said investors would have a special dispensation to repatriate all their profits and dividends back home despite the foreign currency shortages.
Zimbabwe’s cash crunch worsened in 2014 on the back of sagging exports and panic withdrawals following the central bank’s interventions ostensibly to boost foreign currency receipts.
Some of the companies struggling to repatriate dividend include British American Tobacco Zimbabwe which last year failed to pay over $11 million in dividend to its offshore shareholder BAT Plc.
Since adopting the multi-currency regime, the country’s manufacturing sector, one of the most diversified in the region—has been struggling to access concessionary funding to retool and access throughput materials offshore. This has seen many companies formed during the Universal Declaration of Independence era folding due to unsustainable business models.
Estimates from the country’s industrial lobby group show that foreign currency backlog for companies now hover around $400-$600 million.
Zimbabwe has a trade imbalance that has forced the Reserve Bank of Zimbabwe to come up with a foreign currency priority allocation list as part of desperate measures to manage foreign currency. The foreign currency shortages have also forced local companies to turn to the parallel market to access the green back which is currently trading at a premium of 100 percent on bank transfers