CFU, BAZ join to stimulate investment
Sunday, 11 March 2012 10:22
BY KUDZAI CHIMHANGWA
THE Commercial Farmers Union (CFU) and the Bankers Association of Zimbabwe
(BAZ) are working on improving the country’s productive sector capacity by
stimulating investment inflows leveraging on the real estate sector as
collateral. The arrangement entails private enterprise mobilising funds and
resources against the value of existing structures. They will also engage
the government to act as a guarantor to mortgage transactions that are
financed by foreign investors.
CFU president, Charles Taffs, said that should the arrangement be taken up
at policy level, then this would ultimately lead to less dependence by the
country’s productive sectors on the state.
“We want to mobilise funding for the productive base, this effectively
reduces high dependence on imports as is currently the case and also
increases the tax base translating into more revenue inflows for the
fiscus,” said Taffs.
“Under this arrangement, the Ministry of Finance would need to ring fence
investment into the mortgage market, thereby providing a guarantee for the
ability to remit while payments will not change for the duration of the
loan.”
Before the inception of the inclusive government in 2009, Zimbabwe endured a
protracted period of economic decline, characterised by world record
hyperinflation, a massive flight of foreign capital and reduced foreign
direct investment inflows.
Perceived country risk and outstanding arrears to multilateral financiers,
among other issues, only served to accentuate the country’s isolation from
the international community.
However, the economic stability brought about by the inclusive government
left investors with real estate as the only asset class salvaged as savings
in banks were eroded overnight with the adoption of the multicurrency
regime.
The international community presently has a voracious appetite for new and
emerging markets, he said.
BAZ president, John Mushayavanhu, said the arrangement would entail the
creation of a cluster that would pool together real estate assets, which
would consequently be used as collateral to secure five to 10-year financing
from international investors.
“It would be a consortium in collaboration with local banks; banks which
have customers who are borrowing on the basis of providing security in the
form of real estate,” said Mushayavanhu.
“This will also lead towards a reduction in the cost of borrowing. We
shouldn’t have problems with this type of arrangement.”
He added that the country risk needed to be underwritten.
Zim experiencing more cash outflow:Taffs
Zimbabwe is presently experiencing a huge liquidity crisis as the
export/import ratios are out of control while the export bill remains high.
“Consequently a lot more cash is going out (of the country) than that coming
in,” said Taffs.
“When the finance ministry provides this guarantee, the CFU then goes into
the international market to search for wholesale money, bring it back to the
country and lend it against the value of existing assets.