Oliver Kazunga, Senior Business Reporter
BUSINESS executives have proposed that Government avails grants and guarantees to resuscitate ailing companies that have challenges securing loans from banks.
Contributing during an open discussion at the original equipment manufacturers’ conference held in Bulawayo yesterday, industry captains said increased funding support was critical if the country is to realise solid economic growth.
Colmin Resources Zimbabwe executive director, Mr Mpumelelo Ndiweni, said while banks were willing to advance working capital to companies, many businesses were failing to secure the funding due to weak balance sheets.
“I totally agree with what the bankers have provided and we all agree it’s good on paper but practically as industrialists, we know most of the funding by banks must be balance sheet- supported.
“Most of our factories cannot actually get the finance and my input to the Ministry of Industry, Commerce and Enterprise Development is that can we get grants and guarantees to fund the resuscitation of local factories,” he said.
For example, Mr Ndiweni said their South Africa counterparts have got a manufacturing competitive growth, which gives them grants.
“Our colleagues in Botswana also do the same as well, depending on the scale of the investment or any new investment.
“So, my input is to say can we adopt such an approach as well,” said Mr Ndiweni.
Due to the prevailing economic climate and antiquated machinery, a majority of equipment has outlived its lifespan. The industries are struggling to boost output as the machinery experience continuous breakdowns.
“We really need to replace most of the factory equipment because of age. It’s actually high cost and risky, which the banks will not entertain and the Infrastructural Development Bank of Zimbabwe is not yet at that level of providing the grants,” said another participant.
An official from Midlands Metals Mr Itai Zaba said it was important for the Government to support production-led growth to industry to boost their capacity and promote import substitution, which ultimately reduces Zimbabwe’s import bill.
Due to subdued exports since 2009, Zimbabwe has continued to record negative trade balance as the country has become a net importer of goods. However, in the first 10 months of last year, Zimbabwe managed to narrow its trade deficit by 28 percent to $1,56 billion on the back of improved exports.
Zimbabwe Textile Manufacturers’ Association chairman, Mr Freedom Dube, said even if some companies were able to secure funding from banks, their efforts to boost productivity were being hampered by short-term funding with high interest rates.
“If you are talking of interest rates at 10 percent from a loan say of $50 million that’s a lot of money, which when it comes to paying back the loan this also chokes the company’s ability to meet the financial obligation,” he said.
A representative from Nedbank Zimbabwe Mr Themba Mhlanga stressed that interest rates were largely influenced by the cost of on-lendin finance.
In the past, the Reserve Bank of Zimbabwe has been using moral suasion to encourage local financial institutions to lower their interest rates. — @okazunga