In the biggest sign of thawing relations between Harare and London, the UK Government will inject $100 million to Zimbabwean companies as capital expenditure or working capital.
Reserve Bank of Zimbabwe Governor Dr John Mangudya confirmed the development saying the facility would go a long way in improving the companies’ competitiveness.
This is the first direct commercial loan to Zimbabwe by the UK government in over two decades.
“This is a significant move in that it is a medium term facility to be used for the revival of companies in Zimbabwe,” said Dr Mangudya.
“There has been a deficit of medium term funding which was not forthcoming to Zimbabwe. This is going to improve the competitiveness of the industry in Zimbabwe in terms of retooling and improvement of productivity.”
Dr Mangudya added: “More importantly, it is a sign of confidence that the international community has found in Zimbabwe. It is a seal of approval or endorsement of Government policies and measures aimed at transforming the economy into a middle income by 2030.
“From the RBZ side, we are pleased by this facility because it will increase exports by Zimbabwean companies.
British newspaper, the Financial Times yesterday reported that the fund would be availed through the British Government’s development finance institution, the Commonwealth Development Corporation (CDC) and the Standard Chartered bank.
According to the report, the CDC, Britain’s development finance institution, will share the default risk on loans to provide foreign exchange to dollar-starved Zimbabwean businesses that are struggling to operate. “The UK is teaming up with Standard Chartered Bank to lend $100m to Zimbabwean companies in what will be the British Government’s first direct commercial loan to the southern African nation’s private sector in more than 20 years.
The loan is the biggest sign of thawing relations between Harare and London which imposed sanctions on Robert Mugabe’s regime in the early 2000s,” read the report.
Mr Nick O’Donohoe, the CDC’s chief executive, said his organisation had been preparing the loan facility since the day Mr Mugabe was replaced by his former deputy, President Mnangagwa.
“We think it’s pretty significant,” he said, adding that the last direct CDC loan to Zimbabwe was to a fish farm in 1994.“We are not aware of any commitments that have been made by anybody since the change of government,” said Mr O’Donohoe.
He sought to head off criticism that western governments should not start lending until after presidential elections scheduled to take place by August. Mr O’Donohoe said the planned loans were to the private sector and did not represent an endorsement of the Government.
The report says the loans, which will be for up to three years, can be used for capital expenditure or working capital.
The loan facility as quoted by the publication leaves the opposition leaders with egg on the face as they have on numerous occasions called for the Western community to maintain its hostile stance on Zimbabwe.
The report says the CDC and Standard Chartered are finalising a list of companies that can access loans that are likely to focus on the food processing, manufacturing and agricultural sectors.
“Zimbabwe’s economy has been shattered over the last two decades, yet holds real potential. If a new Government in post-election Zimbabwe encourages investment and pro-business policies, Zimbabwe can be one of the great investment success stories of the next decade,” said Mr O’Donohoe.
Mr Sunil Kaushal, regional chief executive of Standard Chartered Bank, said the loan facility was similar to that of a previous partnership with the CDC when the two lent to Sierra Leone at the height of the Ebola epidemic in 2015.