Zimpapers Logo

Reserve Bank of Zimbabwe building in Harare

Oliver Kazunga Senior Business Reporter
CLOSE to $700 million secured for offshore lending to local companies is lying idle with only one percent of the package having been utilised since its approval in the first quarter of the year.
The Reserve Bank of Zimbabwe (RBZ) says the private sector has only utilised a marginal $7,9 million of the approved loans as of April this year with businesses citing subdued economic performance.

Applications for offshore funding were obtained from sectors such as agriculture, mining, manufacturing, energy, tourism and construction.

“Notwithstanding subdued non-debt creating capital inflows such as foreign direct investment and portfolio investment, utilisation of private sector offshore long-term loans increased from $434 million in 2012 to $1,3 billion in 2013,” said RBZ in its quarterly economic review ending June 30, 2014.

“Despite increased access to private sector offshore facilities in 2013, loan utilisation levels remained subdued during the period January to April 2014, with only $7.9 million of the approved $706.3 million having been disbursed as at April 30, 2014.”

The central bank says the slow uptake of the loan reflects “the general slowdown in economic activity as well as failure by companies to meet some conditions precedent.”

Stringent conditions as well as high interest rates and institutional strength levels have been cited as major bottlenecks.

Since the adoption of the multicurrency system in 2009, the liquidity crisis has remained one of the major challenges hindering economic growth.

The problem has been compounded by lack of access to credit lines from international finance institutions such as the World Bank and the International Monetary Fund (IMF) due to the continued imposition of sanctions by the United States and its Western allies.

The manufacturing sector requires about $8 billion working capital to revamp ailing industries.

The RBZ, however, said local banks sourced credit lines on behalf of firms or on their own books for on-lending locally.

Foreign direct investment, however, remained subdued although it improved slightly from $350 million in 2012 to $373 million last year.

“The increase was mainly attributed to greenfield investments and inter-company loans. Portfolio investment inflows also increased from $99 million in 2012, to $283.3 million in 2013,” said RBZ.

In the absence of an anchor rate, interest rates quoted by banks continued to vary across banks and were largely determined by individual banks’ liquidity positions.

“As at end of June 2014, lending rates ranged between six percent and 35 percent with most banks quoting rates around 20 percent per annum. The level of interest rates quoted by banks, in large part, reflected individual banks’ liquidity positions and their cost of funds.

“Banks with low cost of funds and better access to funding quoted lower rates, compared to the other banks,” said the monetary authority.