Process Of Easing Liquidity In Zimbabwe Begins As IDC Invests US$30 Million in Agribank

Johannesburg, South Africa (PressExposure) April 15, 2011 -- The Industrial Development Corporation of South Africa (IDC) today signed a watershed US$30 million facility agreement with Agricultural Bank of Zimbabwe (AgriBank) - marking one of the first transactions of its kind since the signing of the Bilateral Investment Promotion and Protection Act (BIPPA) between South Africa and Zimbabwe in 2010.

BIPPA seeks to create favourable conditions for investment between South Africa and Zimbabwe; provide security of tenure to South African investments in Zimbabwe; and unlock opportunities for the Zimbabwean local industry to access lines of credit from South Africa

In that context, the IDC Agribank deal is a significant step towards easing for the Zimbabwean financial services sector the liquidity constraints resulting from years of hyper-inflation and will, overall, assist in boosting economic activity in Zimbabwe.

Agribank is one of Zimbabwe's oldest banks, having been established 82 years ago, and is the leading provider of finance to the agricultural and industrial sectors. It also provides banking services to some of the country's largest commercial organisations and, in recent years, has extended its client base to include the SMME and consumer markets. In the process, it has developed the country's largest branch network. Increasing AgriBank's own access to finance, therefore, holds extended positive repercussions for its client base throughout Zimbabwe.

AgriBank will use the six-year term facility from IDC to on-lend to its blue-chip and medium-sized clients, some of which are listed on the Zimbabwean Stock Exchange - with a focus on increasing their production capacity.

US$20 million of the facility has been allocated to firms operating in the agri-business, manufacturing, and mining sectors. US$10 million will be on-lent to the Industrial Development Corporation of Zimbabwe.

As arranged by co-advisory firms, Musa Capital and Neverseez Capital, the borrowing from the IDC is being forwarded at competitive LIBOR-indexed interest rates and is structured to ensure that a large portion of the funding will be used by Zimbabwean companies to purchase South African goods and services. The IDC facility will, therefore, also provide revenue opportunities to South African firms.

"Because it will help to induce productive capacity in several key sectors, we see the IDC facility as a watershed transaction," said Zimbabwe's finance minister, Tendai Biti. "It will also signal that Zimbabwe truly is open for business and that South Africa continues to play a supportive role in Zimbabwe's economic recovery."

Many of Zimbabwe's leading agri-processors have already been earmarked for funding. Zimbabwe minister of agriculture, mechanisation and irrigation development, Joseph Made, said that the intention is for Zimbabwe to regain its former position as the region's breadbasket. "To achieve that, we need to get appropriate capital support to the sector - and the AgriBank IDC transaction makes that possible."

Somkhosi Malaba, CEO of Agribank, agreed that the transaction is significant in addressing the disablement of the banking sector resulting from the past ten years of the country's economic history. "Obtaining capital from sources such as the Afrieximbank, which has just provided US$70 million to the banking sector, and from institutions like IDC, will add momentum to the positive trend in Zimbabwe's economic recovery."

The IDC's divisional executive, resources sectors, Ufikile Khumalo said: "The financial services sector plays a critical role in any economy and, given the central role that Agribank has historically played in the agricultural and industrial sectors, in enterprise development, and in job creation, IDC views this investment with optimism in respect of accelerating the progress of the Zimbabwean economy."

About Musa Capital

Musa Capital is a boutique private equity and advisory firm that has been active on the African continent for fifteen years. []

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Press Release Submitted On: April 15, 2011 at 5:44 am
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