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Prosper Ndlovu : Business Editor

THE government is mobilising seed capital for the establishment of a new industrial development fund that will fully assist in the retooling of ailing companies, Industry and Commerce Deputy Minister, Chiratidzo Mabuwa, has said.

The move follows widespread concern that the $40 million Distressed Industries and Marginalised Areas Fund (Dimaf) and the $70 million Zimbabwe Economic and Trade Revival Facility (Zetref) facilities have failed to rescue ailing companies due to stringent conditions attached to their disbursement.

Most companies in Zimbabwe are struggling to operate competitively due to ageing equipment, with national capacity utilisation tumbling to 34 percent last year, according to the Confederation of Zimbabwe Industries.

“My ministry intends to establish an industrial development fund to be managed by the Industrial Development Corporation of Zimbabwe (IDCZ),” said Mabuwa.

“We’re currently in the process of mobilising the seed capital for the fund.”

Obsolete equipment, high productions costs, an influx of cheap imports and skills flight are some of the hurdles that confront local industry.

The Deputy Minister told Parliament last week that since the adoption of the multicurrency regime in 2009, the government has taken an initiative to partner with some financial institutions to provide funding for the revival of industry and other economic sectors.

She acknowledged Dimaf and Zetref facilities have failed to achieve the desired industrial turnaround although a handful of firms benefited from the facilities.

About 48 companies countrywide received loans worth about $28 million from the $40 million under Dimaf between 2011 and 2014. Many firms complained over tax issues and the short tenure of loans, terms they felt were not ideal for distressed entities.

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 under a $40 million facility that was being disbursed through CABS. Another partnership was struck with AFREXIM Bank to the tune of $70 million under the auspices of Zetref.

This fund was being disbursed through 11 financial institutions with a national branch network that included BancABC, Metropolitan Bank, People’s Own Savings Bank, TN Bank, ZB Bank, NMB Bank, Kingdom Bank, Agribank, Infrastructure Development Bank of Zimbabwe, FBC Bank and Trust Bank.

“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 wasn’t 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’ve 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 wouldn’t 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.