Over a decade in which no lender would touch the country with a long barge-pole, there’s one bank that has become a lender of last resort to Zimbabwe.
The African Export Import Bank’s (Afreximbank) announced this week that it is to conclude a new US$500 million liquidity facility for Zimbabwe, adding to a string of facilities that the bank has run for the country over the past decade.
The bank’s latest facility is a US$500 million facility for Zimbabwe, a fund meant to shore up the foreign currency accounts (FCAs) that banks are setting up under a new policy recently announced by Reserve Bank of Zimbabwe governor John Mangudya. Bank president Benedict Oramah met Finance Minister Mthuli Ncube and Mangudya in Bali, Indonesia, on the sidelines of the 2018 International Monetary Fund and World Bank Group Annual Meetings.
“They discussed the modality of the $500-million Nostro stabilization facility which Zimbabwe had requested from the Bank and agreed on the processes toward concluding that transaction by the end of October 2018,” Afreximbank said in a statement.
This US$500 million from Afreximbank, called the Nostro Stabilisation Guarantee Facility, is meant to provide guarantees to holders of FCAs that they will be able to get their money when they need it. It is separate from another US$500 million, a total of various funds, from which the RBZ announced last week it had started drawing down on.
The latter fund is to pay for imports. It comprises a US$250 million line of credit from UK emerging market fund Gemcorp, a separate US$150 million from Afreximbank and US$100 million from Afrigrain, a commodity trading firm.
According to a 2017 report by Afreximbank, “Zimbabwe has remained among the top three highest beneficiaries of the Bank’s various products and facilities. For instance, the Bank has supported infrastructure development, agriculture, trade finance, services and hospitality and the financial services and banking sectors among others.”
In 2009, with the unity Government in its infancy, Afrex moved in to shore up the country’s finances, providing a credit line of US$250 million, which Zimbabwe used to support gold and tobacco production, to provide liquidity for banks and to fund grain imports.
In 2010, Afrex and Zimbabwe launched the Zimbabwe Economic Trade Revival Facility, meant to support Zimbabwean companies. It later ran into some trouble, when US$9.7 million of the money was stuck in failed bank Interfin.
That year, Afrex accounted for the most credit, with facilities in the first half alone of 2010 amounting to US$268.5 million. By 2014, Zimbabwe had secured a total of US$3.5 billion from Afreximbank.
In 2014, RBZ announced it was introducing bond coins to ease the change shortage. To give the coins value, they would be backed by a US$50 million bond from Afreximbank, hence their name. Further Afrex involvement in Zimbabwe’s sometimes controversial currency reforms came in 2016, when Mangudya, desperate to solve the cash crisis, announced the introduction of bond notes, which he said would be backed by a US$200 million bond from Afreximbank.
That details on the bond were never made public, while Afrex itself remained mum, added to the lack of confidence in Mangudya’s plan. In December, with President Mnangagwa’s freshly into power, Afreximbank announced it was sourcing over US$1.5 billion for Zimbabwe.
Criticism of the bank’s business in Zimbabwe has been that it has seldom given details on the terms of its credit to the country.
Afrex was established in 1993 by African governments to ease trade between their economies. Zimbabwe is one of close to 50 countries that are shareholders in the bank. There are three classes of shareholders, with Governments and central banks being in “Class A”. By virtue of the bank’s rules, Mangudya sits on the board.
The bank has recently acquired a 12 000 square metre piece of prime land in Newlands, Harare, on which it plans to build a new office complex, which would become the the bank’s regional hub.