Zimbabwe News and Internet Radio

CBZ banks on new government

By John Kachembere

Zimbabwe’s largest financial services group, CBZ Holdings, is banking on the new political dispensation to access new capital from international development finance institutions at lower rates for on-lending to various sectors of the economy.

Customers wait for cash at a CBZ branch in Harare (Picture by NewsDay)
Customers wait for cash at a CBZ branch in Harare (Picture by NewsDay)

The southern African country has a new government, led by President Emmerson Mnangagwa, who replaced his long-time boss, Robert Mugabe. Mugabe, who led Zimbabwe since independence in 1980, and was accused of pursuing ruinous economic policies, was forced to resign late November by the military.

The 75-year-old new leader has pledged to revive the shattered economy by boosting farm production and luring foreign investment.

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Since Mnangagwa’s ascension, Zimbabwe has signed up deals worth $1,7 billion with China and long-term financier, African Export Import Bank (Afreximbank) for infrastructure projects and economic stabilisation.

CBZ group acting chief executive officer Peter Zimunya said his organisation, which sources an average of $300 million external loans annually, was ready to pounce on the new window of opportunity and play its part in resuscitating the country’s fragile economy.

“We are well grounded as the biggest bank in the country and as a major player in most sectors of the economy – agriculture, mining and transport, among others. We want to take this opportunity to grow our business,” he told The Financial Gazette.

“As more money comes in it reduces the cost of borrowing, something that has been hurting Zimbabwe for the past few years as we were getting funds at a premium, and we will be able to pass the low interest rates to our customers,” he added.

Market experts said increased funding to the private sector would boost supply-side support at a time when Zimbabwe’s manufacturing sector is operating at below 50 percent, which does not bode well for long-term economic recovery.

The latest Confederation of Zimbabwe Industry (CZI) manufacturing sector survey revealed that capacity utilisation decreased by 2,3 percentage points from 47,4 percent in 2016 to 45,1 percent in 2017 weighed down by poor performance in sectors such as non-metallic mineral products, wood, furniture, transport, equipment production and petroleum products.

CZI chief economist Dephine Mazambani said the major challenges contributing to the manufacturing sector’s demise was failure to retool, which has forced companies to use antiquated and inefficient machinery — with 89 percent of the machinery more than 20 years old — limited access to affordable capital, corruption and foreign currency crisis.

“Fifty percent of companies have had their expenses increased because of the additional costs incurred in accessing foreign currency,” she said.

Finance Minister Patrick Chinamasa said government is actively pursuing the re-engagement with international financiers as a way of lowering the cost of funding to Zimbabwe.

“Our quest towards a ‘New Economic Order’ will also require complementary support from development partners, access to external borrowings, as well as resource inflows into the economy.

“Hence, pursuing the re-engagement process with international financial institutions, in particular the World Bank and the African Development Bank and the European Investment Bank, will be enhanced in order to unlock external new financing required by productive sectors,” he said in his 2018 budget statement.

Chinamasa noted that the loss of correspondent banking relationships, or “de-risking” by leading global banks was also beginning to pose significant risks to the country’s efforts to finance international trade and access to foreign lines of credit.

“In this context, strengthening of re-engagement initiatives and processes with multi-lateral financial institutions and cooperating partners minimises the continuation of de-risking, reduce country risk and improve financial relations,” he added.  The Financial Gazette