CBZ to Avail US$200 Million Facility to Empower Mining Suppliers
Leading financial institution CBZ Holdings is set to provide a US$200 million financing facility through its Enterprise Supply Chain Development (ESD) program to support suppliers in the mining sector. This facility follows the success of a similar arrangement with Mimosa Mining Company, where the bank assisted the miner in financing its supplies through the Local Enterprise Development (LED) program.
By Ryan Chigoche
This initiative comes at a time when mining sector suppliers in Zimbabwe have struggled to access long-term financing.
Currently, loans to the mining sector account for only 11% of total industry loans in Zimbabwe, compared to 20% for individuals.
This discrepancy arises mainly because Zimbabwean banks’ balance sheets are still too small to independently support large mining projects, as these projects have extensive life cycles involving stages such as prospecting, exploration, mine development, production, and reclamation, each requiring sustained and patient capital.
While international funding options are available, rising global risks and Zimbabwe’s perceived country risks have made acquiring financing prohibitively expensive, a situation further worsened by tight liquidity. Additionally, commodity price volatility, driven by geopolitical tensions and global economic conditions, has severely impacted local mines, particularly in the PGMs sector. These challenges have affected the entire sector’s value chain.
However, despite these challenges, CBZ Executive Director of Wholesale Banking, Phibeon Mutibura, said they are concluding talks with more mining companies to establish financing arrangements similar to the one with Mimosa in efforts to strengthen the sector’s supply chain.
“We have signed a US$15 million MoU with a leading mining house, Mimosa, to support their LED program, and we are in discussions with several miners for a similar structure. We are targeting to invest US$200 million in the ESD program, as we see an opportunity to support economic growth by capacitating SMEs, creating employment, and driving growth,” he said.
“Despite these challenges, CBZ’s commitment to the mining sector is evident in the growth of our mining book, rising from 7% in 2021 to 18% by Q1 2024. As of June 2024, it’s significant, and the momentum continues. ESD is gaining traction in supporting Mimosa, and we believe many other companies will follow suit, allowing us to grow the mining industry. We are at advanced stages with many local mines, leading in signing LED MoUs, and by this time next year, we will have numerous small businesses sharing their success stories,” Mutibura added.
In this financing arrangement, CBZ targets SME suppliers trusted by mining companies and who have signed MoUs with the bank. These suppliers can access working capital, short-term loans, capital expenditure financing, and yellow equipment finance to boost their production. This financing is backed by referrals from the mining companies, ensuring transparency and reliability. By financing local suppliers, the initiative will ensure that Zimbabwe’s mining sector operates efficiently, free from supply disruptions, while also saving foreign currency through import substitution.
However, CBZ believes that to strengthen the mining sector’s supply chain, a collaborative approach between miners, banks, financial institutions, and suppliers is essential.
“Banks must offer tailored financial solutions to local suppliers, provide technical assistance, and capacity-building support. They should also collaborate with the government and mining companies to develop financing schemes. Miners, in turn, must commit to purchasing goods and services from local suppliers, provide mentorship and technical assistance, and ensure suppliers invest in capacity building and quality improvement while complying with industry standards and regulations,” said Mutibura.
Additionally, the government was urged to develop policies and regulations that promote local content, create a conducive environment for local suppliers, and provide financial incentives and support to the LED programs.
CBZ’s Enterprise Supply Chain Development (ESD) financing solution leverages non-traditional bank lending methods to provide financing to local enterprises and value chain suppliers within the mining industry. The focus of ESD is on creating commercial linkages between SME suppliers and mining companies.