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NV Distilleries and Breweries hopes to expand to Zimbabwe halted
NV Distilleries and Breweries has been denied a US$125 million loan request from the Reserve Bank of Zimbabwe (RBZ).
The company, which is led by Indian businessman Ashok Jain, was reported in local press to want the loan to assist in creating a large-scale sugarcane ethanol production project in Zimbabwe.
The RBZ’s decision reportedly follows Jain’s recent legal troubles in India as well as NV Distilleries initially making a request for a US$100 million loan at a subsidised rate back in October 2021 with a proposal that also asked for government support, as well as free land, import duty exemptions, and a capital subsidy.
However, by July 2022, NV Distilleries was reported to have increased its credit request to US$125 million, citing a US$165 million line of credit extended by the Indian government to Zimbabwe.
A letter by Jain stated: “We were requesting for the issuance of a standby line of credit (SBLC) for US$100 million in favour of an Indian bank associated with the government of Zimbabwe at a subsidised rate of interest by any bank in Zimbabwe. Please note that this letter serves as a follow up to the same request which we are now seeking your indulgence to have it increased to US$125 million. It is our understanding that a line of credit of US$165 million was extended by the Indian government to the Zimbabwean government.”
Jain’s letter outlined his plans and made a plea for the funds to be released to assist in the expansion. He said: “As a background, NV Distilleries and Breweries (Pvt) Ltd signed a contract with ARDA Zimbabwe in March 2022 during the Dubai Expo for growing sugarcane and Installing a sugarcane milling plant to produce sugar and ethanol. A brewery for alcohol and a distillery for whiskey, rum, gin and vodka will also be installed. We humbly request your intervention in the finalisation of the matter so that we can earnestly begin our operations in Zimbabwe.”
Despite this, the RBZ has said it has no knowledge of such an Indian credit line and could not support the request without backing.
In a letter from RBZ governor John Mangudya, he explained: “Please kindly be advised that the bank is not privy to the US$165 million fine of credit that was extended to the Zimbabwean government by the Indian government. Under these circumstances, we would like to advise that without such a support, we have no capacity to support the issuance of the required US$125 million Standby Letter of Credit.”
Speculation among local reports have suggested that the RBZ’s cautious approach could be based on the lack of confirmation regarding the Indian credit line. Additionally, Jain’s legal issues in India have been predicted to have “played a role in the bank’s decision”.
Prior to this denial, NV Distilleries had already promised to establish a sugarcane plantation, as well as a milling plant for sugar and ethanol production, and a distillery for various alcoholic drinks. The company also allegedly claimed the project would create more than 3,000 jobs and positively contribute to Zimbabwe’s local economy.
Irrespective of this, the RBZ’s position has indicated its cautious approach to issuing credit to large projects from foreign companies that are already facing legal challenges in home markets.
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