The government’s re-engagement efforts with multilateral finance institutions continue to bear fruit with the signing of a US$25 million trade finance agreement between the African Development Bank (ADB) and CABS.
The agreement, which has a tenure of three and half years, is intended to provide companies in different sectors of the economy with long term finance to purchase modern equipment and refurbish plants.
The agreement was signed in Harare today at a ceremony attended by officials from the Ministry of Finance and Economic Development, the Reserve Bank of Zimbabwe (RBZ) and the African Development Bank.
RBZ Governor, Dr John Mangudya said companies are in urgent need of re-tooling and mordenising plants, and the facility will go a long way in providing the much needed foreign finance.
“Zimbabwean businesses need to retool and this will help to increase industrial production and in the process increase exports,” Dr Mangudya said.
Companies in Zimbabwe have not been able to access finance on the international capital markets and local financial institutions have been incapacitated to provide long-term finance due to short term deposits in banks.
The facility, therefore, partly mitigates this challenge by allowing CABS to on lend over a longer tenure in sectors where long term finance is required.
“As one of the top financial institutions in the country, our corporate clients will benefit from a facility with a longer maturity than the short term facilities due to the short term nature of our deposits,” CABS Managing Director, Mr Simon Hammond said.
The intervention is the first trade finance facility in the country after the bank suspended support to the country due to high country risk under previous governments.
The continental lender is determined to see the new phase of cooperation being strengthened going forward.
“This is the beginning of a new phase of cooperation and ADB will help Zimbabwe to rebuild its economy after years of economic difficulties,” ADB Head of Trade Finance Programme, Mr Yaw Kuffor said.
CABS was selected for this intervention due to its strong management team, reputable national franchise and financial strength.
The trade finance facility by the ADB will potentially extend to the broader commercial banking sector in Zimbabwe which has not been strong enough to support economic growth.