Treasury lures private equity funds

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Minister of Finance, Mthuli Ncube, has invited the financial sector to discuss incentives for private equity funds, which he believes can deepen the country’s capital markets and push industrialisation.
This comes as Ncube is also pleading with international development finance institutions to extend more lines of credit to local banks, as he seeks to open more access to cheaper finance for local companies.
“Some companies have no desire to be listed on any exchange, so make use of private equity investors as your sources of capital.
“We currently, have a few such investors such as Mangwana Capital, Takura Ventures. But my view is that we have too few private equity players,” Ncube told a recent international business conference.

“So those in the financial sector, let’s talk about how we can give you incentives as government to establish, launch, capitalise more private equity funds. We want to really deepen our capital markets and this will be a source of funding for our industrialisation.
“What we offer at the moment is prescribed asset status if you want to launch a private equity fund or venture fund, which will then cause pension funds to support you,” he added. Ncube pushed for more innovation in the financial sector.
“If you are in the property sector, seriously consider using REITS (real estate investment trusts). It is my expectation that there will be more REITS listed in hard currency (on VFEX) for further development in the real estate space.
“You can use derivative instruments,” Ncube said.
“We recently engaged the ECIC (Export Credit Insurance Corporation) of South Africa who provided a guarantee to banks in South Africa to lend to the Zimbabwean government. This shows we can be innovative to get around some of the credit risk issues we face,” he added.
The Treasury chief said on the international scene, development finance offered a more realistic route for Zimbabwe’s business sector than private sector finance, as the global economy grapples with a number of issues.
“The credit that we seek through private sector channels is now being constrained (due to global challenges that have for example seen the collapse of a bank in California). Not only is it (private sector finance) expensive, it is less available.
“However, even when private sector finance is available it is likely to be more expensive than development finance.
“So, I would like to urge our diplomats present that we would like to see more visibility from Proparco, FMO in the Netherlands, and from the UK through the CDC and its successor (British International Investment) and other development finance institutions such as the European Investment Bank,” Ncube said.

“This is where credit is cheaper. So please, could you increase your support for Zimbabwe’s banks in terms of credit lines.”
FMO is a Dutch development bank structured as a bilateral private-sector international financial institution based in the Hague, the Netherlands. Proparco is a development finance institution partly owned by the French Development Agency (AFD) and private shareholders.
This comes after the European Investment Bank recently extended a combined €25 million in lines of credit to NMB Bank and First Capital Bank for lending to productive sectors. CABS received €15 million in 2021.
Agro-seed manufacturer SeedCo Limited also recently invested in a seed dryer installed in Harare through a seven-year US$12,5 million financing facility sourced from the French development finance institution, Proparco.
The company said the new plant would quicken access to the market and improve seed quality.
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