News Column

IDBZ Eyes U.S.$10 Million Line of Credit

August 7, 2014

Martin Kadzere

THE Infrastructure Development Bank of Zimbabwe is on the verge of obtaining a $10 million line of credit from the Industrial Development Corporation of South Africa but on condition that it clears the legacy debts on its balance sheet, an official said yesterday. The bank is in arrears to the tune of about $40 million in lines of credit obtained abroad.

Last year, an interest of $1,25 million was charged on the non-performing foreign loans.

IDBZ public relations executive Ms Priscillah Mapuranga said the Ministry of Finance and Economic Development was already working on a requisite legal instrument pursuant to hiving off the legacy debt from IDBZ to a special purpose vehicle specifically created to house and manage the legacy debt and its matching assets. Government controls the bank through Finance Ministry and RBZ.

"Significant progress has been made towards consummation of the line of credit earmarked for the tourism sector in the sum of $10 million between the IDBZ and the Industrial Development Corporation, South Africa," said Ms Mapuranga in an interview.

"Following successful negotiations, the IDBZ and IDC South Africa have since signed all the requisite legal documentation to consummate the line of credit.

"The bank is satisfied with the progress that has been made in that regard. Once this process is complete the bank shall be able to draw down on the facility.

"However, as is standard practice with facilities of this nature certain conditions precedent has to be fulfilled before draw down can be effected.

"In this regard the IDBZ is pleased to advise that it has fulfilled all but one conditions precedent. The outstanding condition precedent relate to the removal of the legacy debt from IDBZ balance sheet."

Ms Mapuranga said IDBZ was satisfied with the progress that had been made in that regard. Once this process is complete, the bank shall be able to draw down on the facility.

Despite Zimbabwe having a fairly developed tourism infrastructure, new investments and reinvestments are required to improve the standards of the facilities.

As such, there is need for fresh capital to spruce up the standards which have deteriorated over the past few weeks. As noted in the National Tourism Policy, there is need for more investments in accommodation sector and conference facilities.

Presently, tourism contributes 10 percent to the national gross domestic product. It is anticipated its contribution to the GDP will increases to 15 percent next year.

The sectors is also expected generate over $1,8 billion in foreign currency from $749 million and to increase tourist arrivals from 2,5 million to 3,2 million next year.

IDBZ has been facing challenges in mobilising lines of credit as it remains under the sanctions list of the Office of Foreign Assets Control, an agency of the US Department of Treasury and the perceived country risk.

While the bank was pardoned by the US Treasury Department to freely transact with US firms and individuals, potential investors still perceive risk in the institution due to the sanctions.

The group aims to be a $1 billion institution by 2018 and the plan rides on Zim-Asset. In its 2013 annual report, Mr Willard Manungo, chairman of the bank said the institution remained open to new investors who share its vision on infrastructure finance and development to take up equity in the bank.

He said a well capitalised bank with a broad institutional shareholder base would enhance the bank's capacity to raise debt capital to fund relatively large and bankable projects.

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Source: AllAfrica

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