Botswana President Mokgweetsi Masisi confirmed a 1 billion pula (USD $94 million) credit facility for Zimbabwe during a press conference in Harare on Thursday, February 28.
The deal is structured in such a way that the Masisi government will not be the source of the $94 million but will provide a guarantee together with Harare to private funders from Botswana willing to invest in Zimbabwe.
Botswana will provide the guarantee via the Botswana Insurance Company which coincidentally is run by Zimbabwean Newton Jazire. Details of Zimbabwe’s guarantee are yet to be revealed.
Key to the finalization of the credit facility was the signing of Bilateral Investment Protection and Promotion Agreements (BIPA’s) which will offer an extra layer of protection for Botswana investors in Zimbabwe.
The BIPA’s were signed by the two countries during the inaugural Zimbabwe-Botswana bi-national commission summit held in Harare from February 27-28.
Initially, there were discussions on a diamond-backed US$500 million credit facility but this was deemed not feasible and abandoned in favor of a 1 billion pula (USD $94 million) gurantee.
As Botswana slowly tries to end it’s reliance on diamonds it is encouraging Botswana private investors to go offshore to diversify the countries economy and capacity.
President Mokgweetsi Masisi said
“We agreed to a credit facility, but we increased it from 500 million (Pula) to one billion (Pula), and the details of which will be sorted out later on.”
President Emmerson Mnangagwa said
“What my brother has said is precisely the situation.”
Press statement by the Botswana Trade Ministry, explaining the Zimbabwe credit facility
1. The two states parties (Botswana and Zimbabwe) previously mulled the extension of a diamond-backed credit facility for US$500 million.
At the end it was decided that this would not be feasible and as such it has been scrapped and abandoned;
2. Botswana has offered to extend a 1bn Pula credit facility to Botswana businesses willing to invest in Zimbabwe. This facility is accompanied by the conclusion of the Bilateral Investment Protection and Promotion Agreement which will offer protection for such investments.
Further, Zimbabwe will be required to take out a counter guarantee with reputable international lending institutions.
These are conditions precedent to the facility being operationalized. Of importance to note is that the Government of Botswana is not taking money out of its coffers to give to the Zimbabwean Government.
It is private financial institutions which will be extending credit to private sector businesses who will, in turn, invest in Zimbabwe with the two governments guaranteeing the loans.
The intention for this arrangement is twofold vis to revive industry in Zimbabwe and to improve the export capacity of Botswana companies operating in the manufacturing and services space.
This is in accordance with our vision of attaining an export-led economic growth. A similar intervention had been planned for South Sudan before it imploded.
