As the year begins and the reign of our new president continues, efforts to revive the economy of our country continue…
Most recently, the export agency of Zimbabwe, ZimTrade, announced an export development fund of $100 million. The fund is being made available to Small to Medium Enterprises (SMEs). Which of course makes sense since the bulk of businesses in Zimbabwe are small to medium.
Zimbabwe has faced economic challenges that backdate to at least 2007 and since then, things have oscillated between terrible and bearable (more or less). Last year in his inaugural speech, President Emmerson Mnangagwa promised to pour out extensive effort in order to fix this. This promise was then further emphasised by the Minister of Finance and Economic Planning, Hon Patrick Chinamasa in his national budget presentation after the cabinet reshuffle. And from the look of things, this is being implemented.
As basic economics state, our cash crisis can and will be relieved if we’re able to export more as a country. Currently, we import more than we export and one of the many reasons for that is our lack of functional industries to produce goods. Therefore, incentivising SMEs to produce and export more is an ideal move as far as ensuring liquidity in the country is concerned.
This particular export development fund has a provision that states that the beneficiaries need to pay back the loans at an interest rate of 7.5% per annum. Not bad considering that according to Trading Economics:
The benchmark interest rate in Zimbabwe was last recorded at 8.86 percent. Interest Rate in Zimbabwe averaged 12.59 percent from 2011 until 2017.
Also, according to the Chronicle, Mr Jena who is the ZimTrade board chairman promised to lessen the huddles that come with acquiring loans for SMEs. The idea is to encourage the growth of SMEs, so ZimTrade will try as much as possible to make it easy for these businesses to leverage on such funds. However, they (ZimTrade) will not compromise on their selection criteria of who and how to disburse the funds.
In as much as this is good news and all, I have concerns. My concerns are mainly fueled by the fact that the export development fund was secured from the Reserve Bank of Zimbabwe (RBZ). Question is, will RBZ actually give the loan in bond notes, USD or it will just add a bunch of zeros into the accounts of the beneficiaries? Also, of interest to know is if the $100 million will be enough to impact significant changes on the economy or on the businesses themselves depending on how many SMEs that loan will be distributed to.
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