LIVINGSTONE MARUFU
Forex-starved Zimbabwe is securitising its high value minerals to access lines of credit from international lenders for on lending to the productive sectors of the economy.
The use of expected revenue from minerals to guarantee loan facilities from financiers comes as lenders have shut their doors on Zimbabwe due to its US$14bn external debt which has closed the taps for funding.
Zimbabwe requires foreign currency to augment the forex inflows through exports to meet the growing demands of companies. The central bank says the high demand for foreign currency is a sign of an expanding economy.
Last year, the Reserve Bank of Zimbabwe (RBZ) secured offshore financing of US$1.8bn from Afreximbank (including letters of credit facilities) and Gemcorp, among others.
“The offshore borrowings were structured on the back of statutory export receivables from commodities that include high-value minerals,” the central bank said.
In his mid-term Monetary Policy Statement, RBZ governor John Mangudya said Afreximbank extended US$365m to the local industry to ramp up production in the wake of supply chain disruptions caused by the Covid-19 pandemic and the Eastern Europe war.
Recently at the sidelines of a high- powered business conference, RBZ
Financial Markets deputy director William Manhimanzi told Business Times that Zimbabwe continues to enjoy a good relationship with Afreximbank as Africa’s trade finance bank is guaranteed of its payment.
“Zimbabwe is using untapped gold as collateral to secure funding from Afreximbank and under this arrangement the multi-lending institution is free to extend loans to us,” Manhimanzi said.
RBZ said Afreximbank has in the past 28 years transformed the face of Africa by financing trade for sustained development and the central bank looks forward to more loans.
According to RBZ, Afreximbank’s interest rates range from 6.5% to 7.5% compared to some facilities from IFIs, which have been above 9% since 1998/1999 with no reprieve on interest charges since then.
When the RBZ introduced bond notes in 2016 to alleviate the low levels of liquidity in the economy, the surrogate currency was backed by a US$200m Afreximbank facility.
Afreximbank was granted land in Harare by the government to build its Africa Trade Centre.
The centre will house Afreximbank’s regional office, a world-class hotel, a trade information centre, a major conference centre and a tech incubation lab.
Afreximbank group’s total assets grew by 13.4% to about US$22bn as at December 31, 2021, from US$19.3bn as at December 31, 2020, primarily due to the 11.5% growth in net loans and advances and a 12,1% increase in cash and cash equivalents to US$18.2bn and US$3.1bn respectively.
