Musokotwane calls for lower cost of capital to promote investment growth

Minister of Finance and National Planning, Situmbeko Musokotwane, says there is need to lower the cost of capital so as to allow economic growth through investments.

The cost of capital means the expenses that companies incur in order to be able to finance or fund their operations.

Dr Musokotwane, who was speaking during a panel discussion at the three-day European Union (EU)-Zambia Lobito Corridor Business Forum today, urged African countries to borrow responsibly saying this will also help reduce the cost of capital.

He said Zambia’s management of its debt restructuring under a good leadership is an additional contribution to the country being a credible partner.

He added that hosting the EU-Zambia Lobito Corridor Business Forum is part of the solution to lowering the cost of capital, particularly for external capital.

Dr Musokotwane explained that part of the problem is the risk profile for the continent, noting that it gets overly exaggerated thus lenders want more out of African borrowers in order to cover themselves.

He further stated that the forum gives lenders and businesses firsthand experience to assess the situation instead of just hearsay.

The minister explained that the Lobito Corridor is a framework for encouraging investments.

Dr Musokotwane noted that it also allows for demonstration that investments in Zambia and the continent as a whole can actually deliver better rates of return and subsequently helps to lower the cost of capital.

And European Investment Bank (EIB), Head of the Sub-Saharan Africa Division, Public Sector, Diederick Zambon, noted that lack of set standards bring about institutional gaps especially in processes that delay decision making.

Meanwhile, Bank of Zambia Governor, Denny Kalyalya, disclosed that the Central Bank has issued guidelines which financial institutions should take into consideration when lending.

Dr Kalyalya said central banks in the region and beyond, are working together to see how best to address the matter through various forums they sit on.

And Cassa Depositi e Prestiti (CDP) Head of Multilateral Institutions and Public Development Banks Financing, Davide Petrangeli, noted that about 250 million Euros was released to the Africa-France Corporation towards infrastructure development in the Lobito corridor.

Speaking at the same event, ABSA Bank Chief Executive Officer (CEO), Mizinga Melu reiterated that the Lobito Corridor is bringing about massive opportunities for the country.

Ms Melu said Zambia on the other hand is currently in a much better situation economically compared to previous years.

She noted the importance of responsible lending in the banking sector with a particular focus on green renewable energy for the Lobito Corridor project.

Ms Melu further said there is however need for financial inclusion to make borrowing for small and medium enterprises (SMEs) easy.

And Trade and Development Fund Group (TDG) and Group Executive, Corporate Affairs and Investor Relations Executive Director, Mary Kamari said all the there is a huge opportunity for more growth in the corridor.

Meanwhile, the Finish Undersecretary of State for Development Policy, Pasi Hellman, called for strengthened collaboration in financing.

Another vital component that was discussed in unlocking private sector finance is compliance with standards and sustainable financing regulations, which is often a challenge for investors in emerging markets and developing economies.