ZIMBABWE is missing out on critical financing for long-term trade and development projects, forcing borrowers to opt for shorter term funding due to uncertainty over the continued usage of US dollars, businessdigest has been told.
Over the past several weeks, it has emerged that banks were no longer providing foreign currency for long-term projects past 2025.
Statutory Instrument 118A of 2022 allows the use of foreign currency until the end of 2025.
Resultantly, businesses are unsure of the monetary direction the authorities plan to take, and many are unwilling to commit to long-term funding of projects.
“I’m suspecting that because of the challenges prevailing in the market, borrowers have tended to borrow for short-term trade financing, mostly for consumption, and we have not had significant requests for building factories,” the African Export–Import Bank (Afreximbank) Finance, Administration and Banking Service executive vice president Denys Denya told the Independent.
“The infrastructure project that I can think of is the Beitbridge Border Post, but we don’t have demands from the private players who want to recapitalise, buying equipment, things that we are passionate about, for example, industrialisation.
“That’s why I was appealing to people to say we need to focus on long-term, medium to long-term finance.”
The need to secure trade finance would improve the country’s trading position that continues to be dominated by imports.
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In the first eight months of the year, the country exported goods worth US$4,48 billion against imports worth US$5,89 billion.
Most of the exports are skewed towards minerals and tobacco.
Denya said Zimbabwe had missed out on a lot of opportunities over the years.
“I have spent 10 years in Cairo (Afreximbank headquarters) and I have seen Afreximbank develop 12 industrial parks across the continent, and none of them in Zimbabwe,” he said.
“I have seen the bank provide money for development of oil and gas, none of it in Zimbabwe and manufacturing, none in Zimbabwe.”
One of the major reasons why banks are opting not to support local firms apart from the expiration of the use of foreign currency by December 2025 is that most projects are not viable and lack feasibility studies.
Local banks are refusing to lend for projects past 2025 despite sitting on US$1,6 billion in foreign currency deposits as at the end of last month, according to the Reserve Bank of Zimbabwe.
Some of the long-term projects that require funding include roads, housing, social amenities, the rail network, and health infrastructure.
External lenders have also shied away from supporting the government due to its high debt structure as the country’s public debt is now estimated at over US$20 billion.
“We have not directly lent money to the government except for this year but it’s a structured facility because we were created to ensure that the private sector thrives,” Denya said.
“African governments, in response to the South American debt crisis, their idea was to work with the private sector to increase trade.
“If we lend to the government, it has to be structured in a way that it facilitates trades. For example, if we are doing trade enabling infrastructure like railways, it has to benefit the private sector and has to be structured. But, we don’t essentially do balance of payments lending. I have indicated that we have lent US$10 billion to Zimbabwe since we commenced.”
However, in November 2021, Afreximbank president Benedict Okey Oramah revealed that the bank had disbursed US$13 billion at the time.
Denya said they had provided lending to Zimbabwean companies, financial institutions, and some state-owned companies largely through the financial sector.
This is because loans are usually provided to the private sector through banks as they can reach a wider audience.
