LOCAL financial institution, Central Africa Building Society (CABS), has secured a US$25 million trade finance line of credit facility from the African Development Bank (AfDB) to oil the operations of local firms and small and medium-sized enterprises.
The AfDB facility, recently approved by the bank’s board, comes a month after CABS secured a US$40 million Afreximbank facility for on-lending to exporting companies.
CABS managing director Mehluli Mpofu told NewsDay Business that the AfDB facility would run for three years and would boost the operations of local firms.
“We will use the facility to capacitate exporters for their working capital and capital expenditure requirements,” he said.
“The impact will be an increase in capacity utilisation as well as creation of employment opportunities in the target sectors. We also see an increase in exports and in turn foreign currency. This will positively impact the economy.”
The facility will enhance foreign currency liquidity support for the building society amid a tough economic climate in Zimbabwe, AfDB said in a statement.
“The facility will cover some of the trade finance gaps (which) developed mainly due to international lenders who have scaled down or halted their trade transactions due to their perception of Zimbabwe as a high-risk jurisdiction,” it said.
The pan-African bank said the facility would finance approximately US$175 million of trade and marks AfDB’s fourth private sector intervention in Zimbabwe in recent years.
- MIHR petitions govt on Lubimbi relocations
- ‘Timely IMF boost saved Zim’
- In Full: Twelfth post-cabinet press briefing: May 10, 2022
- New perspectives: Building capacity of agricultural players in Zim
Keep Reading
The facility will complement the recently approved Transaction Guarantee Facility for US$7,5 million to ensure support along the value chains of SMEs and local corporate businesses in Zimbabwe, AfDB said.
The US$25 million facility will boost the low productivity of Zimbabwe’s SME sector, creating jobs and indirectly improving government revenue through taxes from increased economic activity in the sector.
AfDB trade finance head Lamin Drammeh said financial institutions collaboration was key to private sector development in Africa.
“This innovative facility will enable CABS to provide liquidity support for SMEs and women-owned businesses to facilitate their import and export trade finance requirements,” Drammeh said.
AfDB Zimbabwe country manager Moono Mupotola said the trade line of credit would prove vital to encouraging other international and regional lenders to offer additional support to the country’s private sector.
AfDB currently supports 13 initiatives in Zimbabwe valued at US$144 million.
These include initiatives to improve governance and public finance management in the public sector. Other projects involve supporting women and youth to enable them to engage in value addition in agro-based and mining value chains.
“The bank has also been supporting the rehabilitation of key regional and national energy projects, including energy reform technical assistance to support Zimbabwe’s transition to climate smart energy solutions,” AfDB said.
“The bank further supports Zimbabwe’s private sector through regional financial institutions that operate and invest in the country.”
