THE Industrial Development Corporation Limited (IDC) has written to Mpulungu Harbour Corporation Limited requesting for a K5 million loan.
But IDC Group Chief Executive Officer Mateyo Kaluba says the money is meant to help out other companies that have struggled financially during the COVID-19 pandemic.
In a letter dated January 6, 2021, addressed to Mpulungu Harbor Limited Managing Director Dominic Bwalya, Kaluba requested for a short term credit facility to the Corporation.
“REQUEST FOR A K5 million short-term credit facility to the IDC. Reference is made to the aforementioned subject matter and our previous engagements where it was proposed that Mpulungu Harbour Corporation Limited extend a short term credit facility to IDC. In this regard, we would like to formally request for a K5 million loan for a period of 60 days at an interest rate of 20 percent annum. It is proposed that the facility be repaid as lump-sum at maturity. We trust that you will accord our request due consideration and we look forward to your prompt response,” read the letter.
In an interview, Kaluba said Mpulungu Harbor was not badly affected by the COVID-19 pandemic.
“It was supposed to be applied to some of the subsidiaries that were under a lot of pressure because of COVID. Because we are a group of companies, sometimes we have to borrow from within ourselves. So when other companies in the group are struggling, we facilitate financing within the group. So we take the credit responsibility and facilitate what we call inter-group lending. So as you are aware a lot of companies are struggling so some companies are doing better than others. We had companies like Mukuba Hotel which had to close down because of COVID so in such instances, we look at companies in the group that are stronger financially and we facilitate lending between those companies. So we borrow and lend to support the other companies and when they are stronger they repay or we repay,” said Kaluba.
“It (Mpulungu Harbor) was much stronger, it wasn’t badly hit by COVID like the other companies. It is actually very normal, inter-group lending is very normal. That is one of the advantages of being a group of companies because you are able to transact at arm’s length. So for example, it will be very difficult for Mukuba Hotel which was closed to go to a bank for its finances because the bank will say ‘where are you going to pay me from?’ So what you do as the holding company, you check within the group, who is stronger, who is in a position to put money in a deposit and then you borrow them at arm’s length, you offer them interest that is commiserate with that market or at least competitive with the market and then you facilitate that lending within the group. You use your collective balance sheet to give each advantage that you would not accrue if you were [not] a group of companies. Mpulungu Harbour had a deposit which we felt that okay since you are holding a deposit, we will better the interest rate that is being paid and we can use those funds to help the companies that are really struggling under COVID. We are supposed to pay them at the end of this month.”