Botswana ready to operate Zim credit line

FREDERICK KEBADIRETSE
Staff Writer | Friday June 24, 2011 00:00

The deputy Permanent Secretary of the Ministry of Finance and Development Planning, Kelapile Ndobano, said this when addressing the Botswana Confederation of Commerce, Industry and Manpower (BOCCIM) Annual General Assembly (AGM) in Gaborone on Wednesday.  He said the draft agreement was submitted to Zimbabwe in April 2011 and it back with the country's comments in May. They have since been incorporated and resubmitted to Zimbabwe for further commentary, if any.

'On our side, we are ready for implementation of the facility any day,' Ndobano said. 'We are just waiting for the authorities in Zimbabwe to pass the agreement through their Parliament. Hopefully this will be concluded soon and give way to the launching of the facility.'

He said the government would provide a partial guarantee for the lines of credit while Zimbabwe would provide a counter guarantee and indemnity to Botswana for the risk or exposure. In addition, the Export Credit Insurance Company Botswana (BECI) will enter into subsidiary finance guarantee agreements with participating local banks.Ndobano said there would be a steering committee comprising stakeholder ministries, the Bank of Botswana (BoB), BOCCIM and BECI to provide policy guidance and direction to the fund administrator.

On the viability of the facility, Ndobano said the participating commercial banks or financial institutions would assess project proposals for viability and make recommendations to BECI.

'Given that the government of Zimbabwe will be providing a counter guarantee and indemnity to the government of Botswana, the Zimbabwe government will be informed of project approval, criteria and processes before any disbursement is made,' he said.

The two countries have reached an agreement that 70 percent of the resources will go towards the manufacturing sector while the remaining 30 percent will go towards other sectors. 'However, some flexibility will be allowed, depending on circumstances,' said Ndobano.

The Bilateral Investment Promotion and Protection Agreement (BIPPA) was signed in March after the two governments recognised opportunities for increased investment in the two countries and a need to conclude the agreement in the shortest possible time. In addition, the two governments agreed on the principle of mutual benefit in the implementation of the facility.

'This could take the form of export of goods and services from Botswana to Zimbabwe and also to support joint ventures between Botswana and Zimbabwean companies as well as investments by Batswana in Zimbabwe,' Ndobamo said.

Terms and conditions on the line of credit agreed between the two governments include interest rate, repayment period, arrangement fees, guarantee fees and loan threshold per project. Ndobano outlined several benefits the credit line would have to the economy of Botswana and urged the private sector to start businesses in Zimbabwe.He said the credit facility would be a once-off arrangement up to a maximum of P500 million whose continuation would be determined by adequate and beneficial implementation of the initial drawdown.

'That is, at the end of the five-year period, there will be a review to determine whether to continue or wind up,' he said. The Botswana government committed to the credit facility in line with the extraordinary SADC summit decision of 30 March 2009 held in Swaziland to urge member states to support Zimbabwe following the formation of a government of national unity in the country the previous year.