Why Zimbabwe is guaranteeing loans to private companies under the $18 billion stimulus package


0

HON. MARKHAM: My question to the Minister of Finance is what the Ministry’s policy with regards to guaranteeing private borrowings both from limited companies and people. I ask the question in view of three gazetted issues; one for Lucks Flower Roses  where Government has guaranteed part of their debt, same with a boutique hotel in Victoria Fall, a very small amount but we are guaranteeing it and thirdly, sub-Sahara Tobacco. My question is why are we guaranteeing private companies and how are these people selected and is it a Government policy?

THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. PROF. M. NCUBE): I thank Hon. Markham for the question and in fact, I am glad he noticed that we guaranteed some companies, guaranteeing their loans with specific banks. This is the implementation of the $18 billion COVID-19 response package that we put in place to support companies to come out of the COVID situation. Our approach within that programme is to provide guarantees so that we work together with banks to actually provide the loans, we as Government provide the guarantee and it is never 100%. We provide 50%. So the bank is not covered for the other half as we cover 50% and this has worked well in terms of these companies and we will be doing more going forward. The advantage of that is we do not have to outlay resources as Government, but we are able to leverage, unlock resources from the banks to support the private sector because without the guarantees, the banks would not do it and then we are stuck as an economy. We are trying to move forward and this is part of the $18 billion rescue package.

How are the companies selected? First of all, the entrepreneurs come forward and request. They go through their banks and the banks having processed the requirement for funding of the projects, if they think that it is a viable project, they will approve it. The bank and the project promoter then approach their Ministry and Treasury simultaneously. There is a Committee in Treasury, Debt Management Committee that looks through this and analyses.  Some of them have been rejected by the way, and some have been accepted.  So, what we mentioned is what we have accepted.  They are processed, they go through various stages of signatories all the way up from the committee up to myself.   I eventually sign off as the head of the Ministry after the Permanent Secretary has signed it and then we let the borrower know that they have been successful or rather their bank will tell them.  After that we then gazette it.

The gazzetting process is something that Parliament has always looked forward to, to say ‘Minister, gazette the loans that you are contracting for the country and also guarantees to whomsoever, gazette those’.  So, we have started gazetting those and that is a very good practice and a good practice in terms of transparency.  I thank you.

HON. MARKHAM: Madam Speaker, could the Minister just clarify that we are assured that somebody’s companies are not over borrowing to the extent that needs a Government guarantee on the debt because they are waiting for the exchange rate to move.  Are they not feeding the parallel market?  I thank you.

HON. PROF. M. NCUBE: Thank you.  These companies go through a rigorous credit analysis process within the banks in the first place.  They are clients of the bank that is in question.  They would have been scrutinised, their financials would have been analysed and they would have been found to have been credit worthy and worthy of a loan from the bank.

However, for one reason or another, the bank would have felt that they need to enhance the credit standing of this specific account or borrower then they approach Treasury under the umbrella of the 18 billion dollar rescue package.  We also do further analysis.  These companies are analysed twice by the banks and by the Treasury, it is very rigorous.  Chances of them doing shenanigans, parallel markets and so forth are very unlikely.  Banks follow up on the usage of their loans; they do not just disburse and then do what we call ‘fire and forget’, no! They follow through with these loans to make sure that these are properly used and I doubt that the shenanigans that Hon. Markham referred to will then occur. Certainly, they are systems in place to minimise that kind of illicit action.

Continued next page

(111 VIEWS)

Don't be shellfish... Please SHAREShare on google
Google
Share on twitter
Twitter
Share on facebook
Facebook
Share on linkedin
Linkedin
Share on email
Email
Share on print
Print

Like it? Share with your friends!

0
Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

0 Comments

Your email address will not be published. Required fields are marked *