High country risk has affected Zimbabwean companies with offshore financiers and suppliers of critical raw materials shunning local firms, Business Times can report.
The situation has been worsened by local companies’ failure to settle mounting debts.
Since 2001, Zimbabwe could have lost access to more than US$100bn in bilateral donor support, international commercial loans, and grants and loans from the IMF, the World Bank and the African Development Bank and due to this, Zimbabwe had a reported US$34bn funding gap in infrastructure financing in 2017.
“When we apply for the credit lines together with other companies in southern Africa, we find out that some countries are LIBOR +3 and LIBOR +5 for others and we are at LIBOR +7 which means we get the credit lines last and we don’t stand a chance with our counterparts due to high country risk,” the Confederation of Zimbabwe Industries president Kurai Matsheza told Business Times yesterday.
“Even if we get the loans, given the high country risk we will get it at a higher interest rate and that will be difficult for us to repay due to that.”
He said the lack of access to finance from the international financiers is a huge challenge for the industry as without these, industrial growth will be minimal. “Without getting enough money locally, this means outside it will be more difficult.”
Other analysts said a high-country risk and lack of access to capital lead to an uncompetitive investment climate that could outweigh Zimbabwe’s growth prospects.
Captains of industry said the crippling power cuts and foreign currency bids settlement backlogs could affect the economy due to lost hours of operation and limited working capital for local companies.
Zimbabwe owes international financial institutions and other offshore creditors close to US$15bn while local debt amounted to about ZWL$6.9bn
This has led to the decrease in production over the years due to lack of access to international capital hence no meaningful growth is expected.
The captains of industry said the move could trigger shortages of goods in Zimbabwe.
RBZ is battling to deal with the forex backlog amounting more than US$156m to local companies.
Business leaders said RBZ was taking more than 50 days to avail the forex allotted from the auction system. They said some bids done in January have not been honoured.
The development has left local companies scrambling for survival as the international suppliers are now demanding pre-payment until the debts have been settled.
This has further created shortages in the market as the manufacturing sector was already producing at a reduced capacity due to forex challenges.
The Zimbabwe National Chamber of Commerce president Mike Kamungeremu said: “The local financial institutions have not been able to finance us and the situation is even harder outside. As a result, some of our foreign creditors have declined continuing to supply us due to long outstanding debts.”