AFRICAN Development Bank (AfDB) has extended a $25 million trade finance line of credit to CABS for on-lending to the productive sector of the economy.
BY FIDELITY MHLANGA
Officiating at the signing ceremony yesterday, AfDB country manager Damoni Kitabire said the agreement signalled the bank’s new commitment to Zimbabwe
“The agreement for signature today for a trade finance line of credit worth $25 million with a tenor of three-and-half years, is a testament to the AfDB’s strong commitment to Zimbabwe. It marks the beginning of a new commitment to Zimbabwe. It marks the beginning of a new relationship not only between AfDB and CABS, but also one that we believe will potentially extend to the broader commercial banking sector in the country,” Kitabire said.
He said the regional bank was cognisant of Zimbabwean financial institutions struggle to secure trade finance lines from the international market.
“This facility will be used to provide medium term foreign currency liquidity specifically for trade finance purposes. The facility therefore, partly mitigates this challenge by allowing CABS to on lend over longer tenor especially in sectors where longer term trade financing is required such as agriculture, infrastructure and manufacturing,” Kitabire said.
He said business confidence in the country had been low over the last two decades as the country’s private sector had grappled with a plethora of challenges, including lack of working capital, liquidity constraints, inadequate foreign currency for manufacturing companies to import the much needed raw material and the continued influx of cheap imported products.
High cost of finance, high input costs and outdated machinery have also dragged down the country’s manufacturing sector.
CABS managing director Simon Hammond said there had been scarcity of long term deposits, acknowledging this facility would go a long way in supporting the local industry.
“Due to the prevailing economic conditions, long term deposits have been scarce, as local investors have been skewed towards short term and transitory deposits. Hence this credit line which is a three and half year facility brings with it the stability of medium to long term funding. This will enable us to recapitalise the productive sector. In the past CABS has received credit lines from a few external funders and has performed well in settling the loans as they fell due,” he said.
Reserve Bank of Zimbabwe governor John Mangudya said the facility came at a time when Zimbabwe was engaging with international financial institutions for the clearance of arrears.
Mangudya also made similar remarks previously made by the Confederation of Zimbabwe Industries that local industry required $400 million for retooling.