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ZIMBABWE faces a number of hurdles in its quest for economic turnaround but the country is poised for growth provided it puts a number of fundamental issues in place. Industry is one of the major drivers of economic growth and the manufacturing sector capacity utilisation, currently sitting at 34 percent, should be raised if the country entertains hopes of achieving sustainable economic stability. A number of initiatives have been implemented in the past to get industry back on track but these have largely floundered due to a number of reasons.

The foremost impediment to industrial revival has been lack of capital to enable firms to retool. Since the advent of the multi-currency system in 2009, many companies have folded whole others are struggling because they don’t have money to retool. Obsolete equipment, high production costs, an influx of cheap imports and skills flight are some of the hurdles Zimbabwean firms are confronted with on a daily basis. The situation has not helped by the fact that the Government has been unable to assist them to access cheap loans due to sanctions. Local efforts to help industry with working capital have done little to ameliorate their challenges because facilities such as the Distressed Industries and Marginalised Areas Fund had stringent conditions and thus did not benefit most of them.

About 48 companies countrywide received loans worth $28 million from the $40 million made available under Dimaf between 2011 and 2014 with the majority of them complaining about tax issues and the short tenure of the loans. Some companies who benefited have failed to pay back the money on set timelines resulting in costly litigations that have forced the collapse of some. In 2010, the government entered into a partnership with Old Mutual to set up Dimaf while another partnership was struck with AFREXIM bank to the tune of $70 million under the auspices of the Zimbabwe Economic and Trade Revival Facility.

The Deputy Minister of Industry and Commerce, Chiratidzo Mabuwa, told Parliament last week that the government is mobilising see capital for the establishment of a new industrial development fund that will assist in the retooling of ailing companies. She acknowledged that Dimaf and Zetref had failed to achieve the desired industrial turnaround. “Our experience, however, with Dimaf and ZETREF has established the need for government to provide funding for industry to retool and re-equip its operations in order to remain viable and globally competitive,” said Mabuwa. “While the government initiated these facilities, it was not able to get the fiscal space to make a contribution.

“On the $40 million facility, the government was supposed to contribute $20 million. However, there was no fiscal space then in 2010, neither do we have it now.” As a result of the financial limitations on the part of the government, Mabuwa said, CABS looked at the applications sent to it alone. “Of course they (CABS) were looking at ascertaining whether or not the company would be viable for them to get their money back and they made the selections themselves,” she explained. “So, the government’s monitoring was a little bit limited.

This is why I then went on to say that, our experience has shown us that it’s better if we introduced our own fund that we have control over and be able to monitor.” Mabuwa said once the new fund was in place, it would be issued according to the value chain approach.

“We’ll be saying that, since we’re value adding, we look at the entire value chain. If we look from cotton to clothing, which means the selected companies will definitely include those companies in Kadoma where cotton is grown. “So, using that value chain approach, it would not be a matter of going on a scatter graph approach but it would be rather having a designed value chain, which will be easy to monitor,” she said. We welcome the new fund and hope the government will expedite its implementation so that the manufacturing sector is capacitated.

While we acknowledge that Treasury has very little fiscus space to maneuvre, we feel this is one fund which should get priority in allocation of funds. Industry needs funds urgently to increase capacity utilisation. Zimbabwe also needs to reduce its huge import bill and increase exports and this can only happen if the manufacturing sector is fully functional.