Why Zimbabwean Government Stops Banking Offering Loans or Lending to Businesses, Individuals

  • Sugar processor Tongaat Hulett stopped offering prepayments to contract farmers.
  • Some companies in Zimbabwe have stopped offering credit facilities in local dollars.
  • Industry watchers fear that 50% of bank income could be affected by governments banning banks from lending.

Some companies operating in the agro-business sector in Zimbabwe have stopped offering credit facilities and prepayments, and choose to operate on a cash basis, after the government stopped banks from their core business of lending.

Last weekend, President Emmerson Mnangagwa ordered banks to stop lending or offering credit lines to businesses and individuals. This, he said, was meant to stop speculation against the falling Zimbabwean dollar.

The Governor of the Reserve Bank of Zimbabwe, John Mangudya, called it painful but a “temporary, necessary measure to ensure that there is common sense in terms of curbing inflation”.

A few days later, companies began reporting to their suppliers and clients that their operations were crippled.

Sugar processor in South Africa Tongaat Hulett, in a statement to contract farmers, said the company could not offer prepayments.

The company’s chief executive officer, James Bowmaker, said:

It is with regret that the millers advise on the immediate cessation of advance payments until further notice. We normally finance the advances from loan proceeds that we receive from the banks. Following the recent suspension of loans by banks, we find ourselves unable to continue offering progress.

Five, a company that trades in animal health products, stopped offering credit to clients who pay in local currency because of its volatility.

“The rapid depreciation of our local currency necessitates a realignment of our terms of trade with our customers.

“Given the current reality, with immediate effect, we will no longer be able to offer credit terms for every purchase made in Zimbabwean dollars,” said the company’s CFO, Jaene Ellis.

Surrey Group, one of the country’s largest privately owned, integrated beef and chicken slaughterhouses with a food processing operation, called on all its creditors to pay off their debts in local dollars as soon as possible.

Also read | Chinese investors must respect African laws, says US Under Secretary

“We kindly request that all outstanding balances be cleared before the end of the day, Monday 16th, 2022,” said the company’s CFO, Michael Zihumo.

The government and banks have been playing cat and mouse since Mnangagwa announced he would cancel the licenses of those he suspected of working with foreign governments to undermine the Zimbabwe dollar.

Some financial services companies, who chose not to be named, complained that the current measures put in place by the government are likely to wipe out up to 50% of bank revenue, as lending is the core business of financial institutions.

Zimbabwe’s official bank rate on Monday was Z $ 275.79 per US dollar, up from Z $ 165.99 on Friday. In the parallel market, US $ 1 varies between Z $ 400- $ 420.

The News24 Africa Desk is supported by the Hanns Seidel Foundation. The stories produced through the Africa Desk and the opinions and statements that may be contained therein do not reflect those of the Hanns Seidel Foundation.

Why Zimbabwean Government Stops Banking Offering Loans or Lending to Businesses, Individuals

Source link Why Zimbabwean Government Stops Banking Offering Loans or Lending to Businesses, Individuals

Back to top button