China Development Bank Corporation (CDB) has, through its cooperating partner, the Infrastructure Development Bank of Zimbabwe (IDBZ), extended a $30 million line of credit to cater for small to medium-sized enterprises (SMEs) in the country.
Ambassador of the People`s Republic of China to Zimbabwe, Xin Shunkang, said the financing package, the Special Loan for the Development of African SMEs, was one of the numerous avenues through which China was seeking to enhance relations with African states.
“This $30 million line of credit to IDBZ is only the beginning, bigger things will come in the near future,” said Xin.
The facility extended by CDB to IDBZ is a dual tranche line of credit amounting to $30 million, at an interest rate of 10% per annum and split into two components, namely Tranche A amounting to $10 million earmarked for capital expenditure, and Tranche B amounting to $20 million earmarked for working capital support.
The capital expenditure portion will have a tenor of five years while the working capital would mature after a year with no option to roll over.
The availing of this facility to the IDBZ follows the announcement of eight new measures at the Fourth Ministerial Conference of Forum on China-Africa Cooperation in 2009.
One key policy measure announced was to help Africa build up financing capacity and support Chinese financial institutions in setting up a $1 billion special loan facility for small and medium-sized African enterprises.
IDBZ chief executive officer Charles Chikaura said the medium-term special loan would go a long way in assisting local companies to acquire capital equipment as well as meeting operating expenses at affordable cost.
“IDBZ intends to buttress the objectives of the establishment of this loan facility by supporting eligible Zimbabwean companies which will positively contribute to the attainment of the aforementioned objectives,” he said
Chikaura said it was the bank`s hope that the facility would assist in consolidating gains already recorded under the Zimbabwe Economic and Trade Revival Facility (ZETREF) in direct support of the policy measures enunciated under the Medium-Term Economic Plan.
“Building on the firm foundation of its cooperation with CDB, IDBZ is confident of mobilising additional lines of credit to support economic development and social transformation in Zimbabwe, thereby contributing to the nation’s sustainable development agenda,” Chikaura said.
In a speech read on his behalf, Finance ministry secretary Willard Manungo expressed appreciation to CDB for extending the line of credit to IDBZ and expressed hope the facility would assist in consolidating gains made thus far on the economic recovery path.
Finance ministry accountant-general Judith Madzorera urged the two banks to be flexible on the eligibility criteria for the facility to expedite its absorption by final beneficiaries to realise the intended benefits in the economy.
The cooperation between IDBZ and CDB is an extension of the sustained cordial bilateral relations between the People’s Republic of China and the Republic of Zimbabwe, which date back to four decades.
The facility is open to all companies operating in Zimbabwe with particular emphasis on SMEs. The criteria to be fulfilled include solid management team in place, audited financial statements for the past two years, sound business plan, clearly highlighting proposed utilisation and impact of the funds sought on the applicant and at least 40% local value addition.
In line with its development mandate, IDBZ through this facility is keen to support those companies which will create positive impacts through employment creation (or preservation), incremental capacity utilisation, SME inclusion in the value chain, fiscal effects, gender involvement and local value addition.