The Bankers Association of Zimbabwe (BAZ) says local companies seeking working capital have to source it elsewhere other than banks as they do not have the capacity to provide the required funding.
BY MUSA DUBE
Speaking in Bulawayo last week, BAZ immediate past President George Guvamatanga said due to the liquidity crunch, local banks had no capacity to provide loans to local companies.
“Currently the Zimbabwean banking sector is characterised by slightly above US$4 billion in deposits of which above 70% are transitory in nature. This on its own is a major handicap of the banking sector to be able to finance mining sector. It is out of these little resources that all sectors require a share,” Guvamatanga said at the Mine Entra’s Joint Suppliers and Producer’s conference.
“The local money markets have failed to take off meaningfully, with local capital market, that is, ZSE also failing to provide an adequate platform for fundraising for economic development. This then calls for the economic players to strategise and look at means of accessing finance from outside the country. We have seen big corporates including Bindura Nickel Corporation taking this route.”
Guvamatanga said traditionally, the local mining sector has been financed through internal funding, shareholder equity, debt financing from various sources including shareholders loans, structured financing from buyers and syndicated loans from various banks locally and internationally.
“However, in the liquidity constrained environment characterising the country, banks in Zimbabwe are not in a position to meet the capitalisation needs of many players in the mining sector,” he said.
He said there was a need for a contextualisation of the abilities of the local banking sector as well as having a clear understanding of the limitation of the local stock exchange in attracting sufficient levels of capital for the mining sector.
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“It is imperative to look at the alternative sources of financing to circumvent the liquidity challenges affecting the country,” he said.
Guvamatanga said some of the methods of raising capital included issuance of corporate bonds, joint partnerships and royalty funding.
Off-take finance or contract financing, escrow account arrangement and streaming arrangements were some of the sources of funding that Guvamatanga urged local companies to employ.
“The ability of the mining sector to access financing in a depressed economy like the one currently characterising the country requires that the mining companies be innovative and look beyond the border.
“The ability of the sector to attract financing requires that the laws governing mining in the country be transparent and investor friendly,” he said.
