By Paul Nyathi|The British Government has for the first time in over twenty years extended a direct commercial loan deal to Zimbabwe.

The deal sees the UK team up with Standard Chartered Bank to lend $100m to Zimbabwean companies in what will be the British government’s first to the southern African nation’s private sector in more than 20 years.

The loan is the biggest sign of renewed relations between the UK and Zimbabwe since London imposed sanctions on former President Robert Mugabe’s regime in the early 2000s.

The deal comes up following Mugabe’s forced resignation in November in a “soft coup” that ended his 37-year rule.

The CDC, Britain’s development finance institution, will share the default risk on loans to provide foreign exchange to Zimbabwean businesses that are struggling to operate.

Nick O’Donohoe, the CDC’s chief executive, said his organisation had been preparing the loan facility since the day Mugabe was replaced by President Emmerson Mnangagwa.

“We think it’s pretty significant,” he said, adding that the last direct CDC loan to Zimbabwe was to a fish farm in 1994.

Mr O’Donohoe sought to head off criticism that western governments should not start lending until after the elections set for July or August this year.

“The planned loans were to the private sector,” he said, and did not represent an endorsement of the Mnangagwa government.

Zimbabwe has been starved of foreign loans since it defaulted on its debt to the International Monetary Fund in 2001 following a dispute with the international community over a chaotic land redistribution exercise initiated by Mugabe.

“Without US dollars, businesses cannot pay for spare parts or inputs,” the CDC said, adding that even those still running were operating at as little as 20 per cent capacity.

The CDC and Standard Chartered are finalising the list of companies that will access the loans that are likely to focus on the food processing, manufacturing and agricultural sectors.

The loans, which will be for up to three years, can be used for capital expenditure or working capital.

“Zimbabwe’s economy has been shattered over the last two decades, yet holds real potential,” Mr O’Donohoe said.

“If a new government in post-election Zimbabwe encourages investment and pro-business policies, Zimbabwe can be one of the great investment success stories of the next decade.”

Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya confirmed the development saying the facility would go a long way in improving the firms’ competitiveness.

“This is a significant move in that it is a medium-term facility to be used for the revival of companies in Zimbabwe,” said Dr Mangudya.

“There has been a deficit of medium-term funding which was not forthcoming to Zimbabwe. This is going to improve the competitiveness of the industry in Zimbabwe in terms of retooling and improvement of productivity.”

Dr Mangudya added: “More importantly, it is a sign of confidence that the international community has found in Zimbabwe. It is a seal of approval or endorsement of Government policies and measures aimed at transforming the economy into a middle income by 2030.

“From the RBZ side, we are pleased by this facility because it will increase exports by Zimbabwean companies.”

The country has attracted over $11 billion in FDI pledges ever since President Mnangagwa took over from Mugabe.

The country has attracted over $11 billion in FDI pledges ever since President Mnangagwa took over from Mugabe. RBZ initiatives are also supporting businesses that use invoice discounting service to attract more foreign direct investment.