Standard Chartered and CDC, the UK’s development finance institution, have signed a risk-sharing agreement that will lend up to US$100mn to Zimbabwean businesses.
The financing, which will be available to Standard Chartered customers, will be used for capital expenditure and helping businesses meet their day-to-day financing needs. The likely recipients will include firms in the food processing, manufacturing and agriculture sectors. The financing will provide much-needed foreign currency capital for these businesses, allowing them to grow, create jobs and improve the country’s economic future.
The five-year facility will see CDC and Standard Chartered share the default risk on up to US$100mn of new loans originated by Standard Chartered Bank Zimbabwe in the southern African state.
The agreement comes at a time when Zimbabwe is preparing for its first elections without Robert Mugabe’s name on the ballot since independence from Britain in 1980. Although the exact date of the presidential and parliamentary elections has not been set, former deputy-turned-new-leader Emmerson Dambudzo Mnangagwa said this week that he will announce the date by month-end.
Over the last few decades, Zimbabwe has suffered an acute economic downturn: hyper-inflation wiped out the Zimbabwean dollar and lending activities have been hampered.
But, as the country gears up for the elections, this may be set to change – at least in the trade finance space. GTR understands that the level of interest among investors in trade finance over the last few months has been significant. Visiting financial institutions – the likes of asset managers, hedge funds and regional players representing international capital – are all keen on resuscitating lines of credit.
“In the past three to four months I have met around 20 or so international players, and all of them are indicating willingness to offer trade finance lines in one way or another,” Lawrence Nyazema, commercial director of Barclays in Zimbabwe, told GTR recently, speaking from his office in Harare. “We’ve also had our old relationships out of Europe and the Americas knocking on our doors and walking down our streets.”
CDC and Standard Chartered’s agreement is a step in the right direction for the country, which has faced a critical shortage of foreign currency for the import of raw materials and other essentials after many years of economic decline.
“Our support will not only enable local companies to access finance in hard currency, but will demonstrate to commercial investors that the economic environment is ready for further financing,” says CDC’s CEO, Nick O’Donohoe.