Zimbabwean companies are struggling to access financing for retooling. Lenders have been reluctant to avail lines of credit due to the country’s debt and the perceived high risk. In a question and answer interview with Standardbusiness’s Blessed Mhlanga (BM), Africa Export – Import Bank (Afreximbank) regional manager southern Africa Gift Simwaka (GS) says his bank is ready to assist.
BM: We have toured close to 10 companies, mostly those involved in manufacturing, what have you taken out of the tour? GS: This has been an eye-opener because I think there is so much buried potential and obviously financing is one of the big things that is affecting industry.
BM: How do you think as a bank you can assist, given that most players have said financing is an issue because loans are highly priced and the tenure is just not correct? GS: I was telling somebody that three and a half years ago we had a financing system which we called Zimbabwe Economic and Trade revival Facility (ZETRF). That facility expired this year and it did assist companies in the same way Distressed Marginalised Areas Fund (Dimaf) did and we think that having seen what is going on and heard that complaint, it’s time to think of relaunching. The first one was $50 million, I think there is room for us to scale it up to $100 million and make sure that it meets two things: 1. That it is cost-effective and should be properly structured in terms of tenure and, 2. That the amounts that are given to these companies should meet all their requirements comprehensively.
BM: There is an argument that the cost of corruption in Zimbabwe is the major driving force pushing up premiums for capital. How will you ensure that this is dealt with as you disburse ZETRF 2? GS: We are an international organisation that does not subscribe to those vices, so we shall create a facility and when we do that we do it along with the government and we make sure that funds are channelled in a transparent manner.
BM: It is not a secret that Zimbabwe is rated as one of the high risk countries to do business with, especially with the prevailing political uncertainties. Are you willing to put money into local business? GS: Afreximbank has an exposure in the country of up to $700 million. Just two weeks ago we were disbursing $150 million to Zesa and I am sure in the next two weeks you are going to see power supply improving, so we do not subscribe to that.
BM: But major lending institutions like World Bank and IMF subscribe to these notions. What have you done on the international platform to calm your shareholders? GS: What we are doing is trying to encourage the world over, the financial community, to understand that there is a huge difference from the risk perception and what the real risk in Zimbabwe is. In doing so, we have demonstrated by taking banks like FBC to the international syndication market. Last year we raised $60 million for them, four years ago we took CBZ and we raised $69 million. We are now taking them (CBZ) back to raise $200 million.
BM: In light of what you are saying and the tour we just had in Midlands, what do you think is the problem with our industry? GS: What we have seen in all the companies we toured is that all companies have orders that cannot be fulfilled. That’s a no brainer. You have a manufacturer, you got a market, we come in and finance them to get the material, produce and supply, so essentially those will be the parameters under which we will be operating.
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BM: Given what you have seen and the challenges that Zimbabwe is facing, what do you think the future of manufacturing looks like if financing is availed, say through ZETRF 2? GS: I think the country has hit the ground and it can only rise and what does that take? It is not only the financing but a combination of factors. I think there is an issue of policy make up, reinvigorating the confidence that players have in each other. We heard that when General Beltings Holdings was trying to get out of the hole, some of their customers did not trust them —that they could produce a product of meaningful quality that meets international standards.
BM: There is now general talk that Zimbabwe has an industry without machinery, relying heavily on antiquated machinery which pushes production costs high? GS — I think that’s a fair assessment but let’s all acknowledge that Zimbabwe was a well advanced economy in the region well before a number of countries which are now emerging, but this changed in the last 15 years when the country was caught in an economic down turn.
BM: As an experienced banker, do you think we can ever catch up given the right financing models for retooling? GS: Most of these companies could have mordernised themselves along the past 15 years and probably re-shaped themselves because the global dynamics have changed. Fifteen years ago China was not a factor and South Africa was a closed country, so these have all come on board. I don’t think retooling should be the only approach because some of the business models have to be completely changed to suit the current dynamics. Some of them are not viable because there is China. For example, we heard that in the textiles industry, it is cheaper to import from China than produce locally.
BM: Government has introduced statutory instruments to protect local industry. Does this sound like a long-lasting solution? GS: As much as government is assisting companies with statutory instruments that will defer the cheap exports, it is not sustainable as the country wants to be a part of the global economy. You cannot protect local industry from imports and want to export at the same time. So at some point, the pressure will mount. It becomes an issue of finding your place in the economic trade dynamics because it’s changing driven by big powers. So you have to find your right competitive advantage.
BM: In the face of what you have just said, is there any logic in funding retooling and risking your money in businesses that might just not be competitive in the long run? GS: We do structures that reflect transaction life cycles and we make sure that when we fund it, it is complete. I spoke earlier about companies having unfulfilled orders, that means there is quantity and price agreed. What needs to happen is delivery so we come in there; provide the funding and they deliver and we move on.
BM: How many years have you been in this game and do you enjoy the stress that comes with it? GS: I have been in this game for 21 years and yes, I am enjoying it. When you are in Zimbabwe, the next worse place is Greece.
