THE European Investment Bank (EIB) yesterday signed an agreement with First Capital Bank for a e12,5 million (US$13,38m) line of credit to support post-Covid-19 recovery and economic growth in Zimbabwe
The EIB resumed lending to local banks/companies last year after about 22 years, following a similar deal signed with CABS last year for a e15 million (US$16,6m) line of credit.
This gesture highlights the thawing of relations between Zimbabwe and the EU, including its businesses, after nearly two decades of frosty relations that saw little if any business transactions between Harare and the west, which maintained harsh sanctions on the country.
Head of the European Union (EU) delegation to Zimbabwe, Timo Olkkonen said the funding facility would help address ease of doing business challenges. “The EIB private sector facility with First Capital Bank Limited follows a similar package agreed earlier with CABS.
“This facility addresses one of the key bottlenecks to doing business in Zimbabwe which is access to finance,” he said.
Ambassador Olkkonen said the deal would also concretise the EU institutions and member states’ joint Covid-19 response package for Zimbabwe. He said the EU would continue to work towards a more resilient post-pandemic Zimbabwe.
The pandemic pummelled virtually all sectors of Zimbabwe’s socio-economic landscape due to prolonged lockdowns and disruption of global value chains; limiting activity and access to funding.
“We look forward to seeing how this facility supports the private sector in the challenging economic environment.”
The credit facility, which has a tenure of 7 years, was expected to help the country drive its import substitution agenda through boosting local production and also drive growth of exports.
Reserve Bank of Zimbabwe (RBZ) governor Dr John Mangudya said at a press conference after the signing ceremony, “This is a landmark signing as it continues to show that Zimbabwe is a good destination for capital, as we are in need for new foreign capital to drive import substitution and increase exports therefore generating foreign currency for the country.”
The EIB’s head of regional representation Southern Africa and Indian Ocean, Jim Hodges said; “The European Investment Bank is committed to ensuring that Zimbabwean entrepreneurs and businesses can invest through new cooperation with local financial partners.”
Mr Hodges added that the facility was a positive step as it would accelerate private sector investment and job creation.
“As part of Team Europe, the European Investment Bank is pleased to provide e12,5 million of targeted financing to First Capital Bank Limited to accelerate private sector investment, create jobs and accelerate the post-pandemic recovery of Zimbabwe,” Mr Hodges added.
First Capital Bank said it was motivated by the potential in the economy, especially opportunities in the agriculture and manufacturing sectors to generate foreign currency through exports.
Mutemwa Ushewokunze, First Capital commercial director said: “Wherever you go in the world, you will always hear that Zimbabwe has so much potential. At First Capital, we have made a commitment to realise that potential by focusing on sectors and industries where there are funding gaps — one only has to look at primary export agriculture where funding is needed to increase foreign currency earnings, and manufacturing where retooling can create efficient and sustainable value.”
The facility was also commended as having potential to help support growth of the country’s tax base and boost innovation, which would drive economic growth.
Mr Ushewokunze added: “As we all know Small to Medium Enterprises and mid-caps have the remarkable ability to fuel economic growth, creating new economies while emboldening old ones, driving industrialisation and while boosting innovation.
Consequently, these kinds of activities expand the tax base. With the EIB’s support we can continue to express our intent to support national economic growth.”
According to First Capital Bank, interest rates for the facility will be lower than average commercial rates prevalent in the country, averaging 13,5 percent per annum.
The facility will be targeting mostly exporters as it is a foreign currency loan, but will be extended to local companies that have the capacity to pay back.