The $40 million Distressed and Marginalised Areas Fund (Dimaf) package to resuscitate defunct industries in the country does not exist at law, CABS managing director Kevin Terry told Parliament yesterday.
Terry made the disclosure when he appeared before the Parliamentary Portfolio Committee on Industry and Commerce to give an update on how much firms had benefited from the fund.
Terry also disputed reports that the fund was meant to rescue distressed companies in Bulawayo and Matabeleland only, saying all distressed companies in the country were entitled to it.
“In a strict legal sense, there is no Dimaf and what happened is that CABS has the Old Mutual deposit of $20 million, but we do not yet have the government part of the agreement of $20 million and neither do we have a government guarantee or the agreement between the three parties,” Terry said.
“There is no fund that exists and at the moment these are loans that CABS is giving to distressed companies, which are not part of Dimaf. There seems to be confusion as to who should be the beneficiaries of this fund because when this was launched, it was done in Bulawayo and people thought all the money was supposed to go to Bulawayo industries.
According to the Memorandum of Understanding (MoU), all distressed companies in Zimbabwe are supposed to benefit.”
Terry added: “Effectively, there is still no fund and what happened was that Old Mutual — in consultation with CABS — said we should just start distributing their $20 million in good faith and CABS was taking a risk because there is no guarantee and we are just acting in good faith and risk making losses.”
He, however, told the committee that there had been reports that the International Monetary Fund would soon make funds available to the Ministry of Finance and in turn they might soon satisfy their $20 million obligation to Dimaf.
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He said from the $20 million deposited into CABS by Old Mutual, $3,96 million had so far been disbursed to six companies.
“We have additional applications for $17,9 million from 31 institutions and we declined seven. We have another 31 we are working on despite the fact that we have no funds from government yet and we have given those loans to companies in Goromonzi, Harare, Marondera, Victoria Falls and the majority of those are in Bulawayo,” Terry said.
He said they were giving each distressed firm a maximum of $1 million and the conditions were not set by CABS but were in the MoU.
Terry said in the event that government did not pay its $20 million obligation, the disbursements would be treated as CABS loans.
“From the 10% interest, CABS will get 3% administration fees and the rest will go to government and Old Mutual,” Terry said.
“The conditions are that we give loans to businesses with clear evidence they will have a positive impact in terms of profitability and employment creation. We want a clean report of sound credit standing and there is a list of documents required like business profiles, certificates of business incorporation, organograms, tax certificates, among other requirements. The interest payable shall be 10% and no loan shall be for a period of more than 10 months.”
But committee members expressed concern at the bank’s stringent requirements, adding distressed firms would have to fork out $46 145 per month in interest charges, which would add up to $200 000 in two years.
