Oliver Kazunga, Senior Business Reporter
THE Reserve Bank of Zimbabwe (RBZ) is working on providing long-term funding for retooling to local companies ahead of the envisaged massive investment under the new economic order, an official said yesterday.
Following the coming in of a new political dispensation, the Government has embarked on a programme to lure investors from across the globe through re-engagement with the international community after over a decade of isolation.
Responding to questions during a breakfast meeting on the export development fund organised by ZimTrade in Bulawayo yesterday, RBZ Deputy Governor Dr Kupukile Mlambo said:
“We (RBZ) are working on something (long-term finance) so that the companies ready themselves when the massive investments come in; so that they are able to retool their factories and become competitive.
“But we need to engage with banks so that we come up with affordable long-term finance. However, l cannot say much about that because it’s something that we are still discussing.”
Among other facilities to stimulate export growth, the Central Bank has come up with a $20 million export development facility for exporters in the manufacturing and horticulture sectors.
The facility, which has a three-year tenure, follows an arrangement agreed upon between the RBZ and ZimTrade last year which attracts a 7.5 percent interest rate per annum and is being disbursed through Homelink Finance and Agribank.
In an interview after the breakfast meeting, Dr Mlambo said banks were at the moment facing challenges in offering long-term financing to businesses as most of the money in the economy was short-term.
“Because most of us keep our money in transactions accounts, it means that the bank has to have that money because you can call that money anytime as they cannot lend it out for one year or two years in case the owner of the money comes and says l want my money.
“But if we had long-term money like for example, such as what are called time deposits, the banks can lend because they know that there is enough time for them to lend out and call back that money when it’s needed.
“We are working with the banks now to find ways of increasing long-term money, which should be cheaper and longer term to pay,” he said.
“We are trying to find ways but we have to understand that as long as you have short-term money, it’s always going to be expensive.”
Dr Mlambo said even if the banking sector was offering short-term financing, the Central Bank has over the years worked hard to ensure lending rates were reduced.
When the country adopted a multi-currency system in 2009, lending rates were as high as 35 percent but have now gone down to around 12 percent on average.
Blue chip companies, according to Dr Mlambo, still get them at less than 12 percent and it was imperative for the monetary authorities to ensure that interest rates were cheaper to promote economic growth and recovery.
Over the years, the Central Bank has employed moral suasion to encourage the local banking sector to reduce lending rates.
The local industry needs working capital to retool as most of the equipment has outlived its lifespan.
Due to antiquated machinery, the manufacturing sector is operating with constant breakdowns, a situation that has rendered the industries uncompetitive.