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Corporation (IDC) of South Africa yesterday signed a six-year US$30 million line of credit that will ease liquidity constraints in the agricultural sector.
This is expected to also boost productivity in other sectors of the economy.
Speaking after the signing ceremony in Harare, Agribank chief executive Mr Somukosi Malaba said the US$30m would be split into two parts – US$20m for agriculture related activities and US$10m for the IDC of Zimbabwe.
The facility will support the agro-processing and food manufacturing industry and the farmers indirectly.
“The facility should lead to job creation and will also help increase agricultural productivity by improving access to inputs at affordable prices by farmers.
“It will also address the general lack of liquidity that has resulted in the absence of clearly defined funding for agriculture from the banks,” said Mr Malaba.
In a speech read on his behalf by Agriculture, Mechanisation and Irrigation Development Director of Human Resources, Simon Masanga, the ministry’s Permanent Secretary Ngoni Masoka said the Agribank-IDC deal would have a positive contribution to the agricultural sector.
He described the deal as a medium term facility at affordable interest rates that should result in the lowering of cost of production for seed, fertiliser and other chemicals produced by agro-processing companies.
“The ultimate beneficiaries in terms of the lower prices will be the farmers.
“Zimbabwe’s long term future is inextricably linked to the performance of the agricultural sector that constitutes about 20 percent of the Gross Domestic Product (up from 12 percent in 2009) and employs 70 percent of the population providing 60 percent raw materials to agro-industries,” he said.
He also added that the facility would capacitate Agribank to play its envisaged role as one of the key financiers of the agriculture sector.
Finance Minister Tendai Biti said the signing of the line of credit was one of the first transactions done after the signing and ratification of the Bilateral Investment Promotion and Protection Agreement (BIPPA) between South Africa and Zimbabwe.
It was aimed at capacitating industry and helping revive the local economy.
“It addresses the challenge of limited lines of credit and the lack of long-term financing within the economy,” he said.
Last week Government and the African Export Import Bank (Afreximbank) signed a US$70 million Zimbabwe Economic and Trade Revival Facility (ZETREF) with the intention of breathing life into industry and ultimately the entire economy.