OLIVINE Industries Ltd, a local unit of Wilmar International, is yet to receive US$8.25 million loan it secured from African Development Bank (AfDB) about four months ago because the regional banking group is waiting for a plan on how the Reserve Bank of Zimbabwe intends to clear the debts owed to foreign supplies by local companies.
In July last year, after the introduction of the interbank rate and conversion of bank balances to Zimbabwean dollars, the central bank assumed the legacy foreign debts of some corporates.
The funds, which the RBZ assumed related to external obligations that could not be remitted between January 2016 and February 2019 due to foreign currency shortages. At that time, the debts amounted to about US$2 billion.
The debt was assumed on condition that the corporates would surrender their Zimdollar balances at 1:1. This occurred about five months after the interbank market, which started with an opening exchange rate of 1:2.5 on February 22, 2019, had been introduced. As a result, the debts were assumed at a lower rate than what was prevailing at the time.
“The AfDB wants to have a clear position on how the Reserve Bank will deal with legacy debts before they release the money to us and this is the major challenge,” the chief executive of Surface Wilmar Investments, the majority shareholder in Olivine, Mr Sylvester Mangani, said.
No comment could be immediately obtained from central bank governor Dr John Mangudya.
In February this year, Dr Mangudya said the bank had processed and validated blocked funds amounting to US$1.2 billion from 730 applications out of 1 080 requests.
Of the applications processed, 299 transactions with a value of US$861 million were rejected for various reasons, ranging from double-dipping to lack of supporting documentation.
The balance of 350 transactions, with a combined value of US$457 million were expected to be processed by the end of February this year.
Wilmar, listed on the Singapore Stock Exchange, owns a 65 percent controlling equity in Olivine through its local subsidiary, Surface Wilmar Investments. They also own 95 percent stake of a cooking oil production plant in Chitungwiza. The balance is owned by Industrial Development Corporation of Zimbabwe. The loan, approved in April this year, will enable the company to construct new processing plants for margarine and tomato sauce and install upgraded machinery with advanced technologies. Olivine plans to increase its domestic and regional production capacity and food supply.
The AfDB said Olivine presented a unique opportunity for the bank to participate in rebuilding agricultural value chains in Zimbabwe, thereby creating jobs, improving food security and nutrition while reducing the country’s dependence on food imports.
Once the company’s production reaches an adequate level, this project could potentially support 200 to 300 local farmers through Olivine’s corporate farming model to be developed in the near future.