THE Bankers’ Association of Zimbabwe (BAZ) has called on mining companies to consider alternative sources of funding instead of relying on loans, for the sector to achieve sustainable growth.
Speaking at a joint suppliers and products conference, on the sidelines of the just-ended Mine-Entra exhibition in Bulawayo, BAZ representative Maxwell Sebethe said mining companies must consider non-conventional instruments for funding, including corporate bonds, royalty funding, contract financing and joint venture partnerships, among other sources.
“There is need for a paradigm shift from looking from the traditional funding for mining ventures to more non-conventional sourcing and methodologies,” he said.
“An assessment of most companies, which have failed in Zimbabwe shows that they collapsed because of huge debts.”
Traditionally, the mining sector has been financed through shareholder equity and debt financing, which Sebethe said was no longer sustainable.
He said banks which have been the major sources of infrastructure funding were not geared towards short-term deposits.
As of end of May 2013, short demand deposits constituted 51%, under-30-day deposits 20% with savings 12%, totalling 83% against long-term deposits of 17%.
Sebethe said the majority of loans and advances to the private sector were used for working capital, although the scarcity of resources and short-term nature of deposit continues to suppress the financing of capital expenditure.
As a result, the procurement of plant and equipment played second fiddle on the priority ladder of loans and advances.
He said out of the commercial and merchant banking loans and advances of over $3 billion, only $204 million or 6,6% represented loans to mining companies. However, in the same period the sector deposited only $136 million out of a total deposit of $4 billion.
“This only represents 3,4% of the national deposit base and is inconsistent with the fact that mining is a much larger contributor to GDP (gross domestic product) and exports,” Sebethe added. “It somehow does not add up,” he said.
BAZ said the International Monitory Fund’s Staff Monitored Programme recently endorsed by Cabinet will go a long way in allaying fear of potential risk in the country. The programme is expected to entail transparency in government dealings.
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