Insurers see trade credit facility unlocking imports to Zimbabwe

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A new trade credit insurance facility should help boost trade between South Africa and Zimbabwe, the insurance firms behind the project say.

South African companies exporting goods to Zimbabwe will be able to purchase trade credit policies under a facility set up by Invent Multiple Agents and Actuaries, a Zimbabwean insurance firm, alongside Asset Finance Insurance South Africa (AFI) and Fachs Reinsurance Brokers.

The cover will protect the exporters from non-payment by Zimbabwean importers. While the two countries are neighbours and have close economic links, Zimbabwe has long suffered from runaway inflation and foreign currency shortages. The country’s new currency, the gold-backed ZiG, began circulating earlier this week.

Invent tells GTR that a lack of insurance “has been hindering credit sales to Zimbabwe and reducing the potential trade between the two countries”, meaning “very few exporters in South Africa have been extending credit to Zimbabwe”.

The facility’s reinsurers have extended US$200mn in overall capacity, while individual policyholders are limited to US$1mn per buyer, although those caps may be increased “where required”, an Invent spokesperson says.

AFI acts as issuer while Fachs brokered the reinsurance agreements. Invent developed the product and will help conduct risk assessments of Zimbabwean buyers and provide an underwriting opinion to the reinsurers.

A prolonged drought is battering Zimbabwe’s economy and in early April the government declared a national state of disaster. Invent expects imports of agricultural products are likely to be among the first to benefit from the insurance capacity, followed by fertilisers, plastics, and animal and vegetable fats.

Farai Chris Zimbango, Fachs’ managing director, says the South African company is “excited to be part of this innovative reinsurance arrangement, which in our view is a game changer for our trading clients between the nations of Zimbabwe and South Africa”.

Invent says the agreement is also a “significant milestone” in achieving the objectives of the African Continental Free Trade Area.

“We are pleased to have developed a much-needed insurance product which secures trade transactions between the two countries,” says Tanaka Zingwanda, the company’s managing consultant.

Source: Global Trade Review