HAVING discussed the state of industry in Bulawayo and the major political, socio-economic and technological factors that affect the city’s economy, it is critical to conclude my submission with recommendations on the possible best way forward.
Often for any company in distress, the most obvious prognosis is money. I, however, want to point out that money is not the panacea to most companies’ problems. Most companies need to revisit their business models as some have been overtaken by events. The biggest challenge in most companies is not money but is the market. According to Moeletsi Mbeki in his book “Advocate for Change”, he refers to the Lagos Plan of Action, which was premised on a number of article observations about Africa’s industrialisation experience.
The first observation was the inadequacy of domestic markets as a basis for far reaching industrialisation under import substitution. The second observation was technological dependency and the third was the financing of imported producer goods. Mbeki also refers to the weakness of the domestic industrial class both in terms of financial and managerial capacity. These observations were highlighted in 1971 in the Lagos Plan of Action and are still applicable to our situation today.
When a company is in distress, it is important to establish whether the company is economically distressed or financially distressed. An economic distress refers to a company’s inability to generate business, a company whose market has been affected. Whereas financial distress refers to a company failing to meet its financial obligations, the company could be in a position to generate good business but not well capitalised.
For those that are economically distressed they should be encouraged to be innovative and come up with new business models or if not allow them to die. If a company can demonstrate that it is financially distressed there should be a deliberate effort to assist them.
The Government should come up with a task force comprising of teams from both private sector and public sector whose mandate is to research and recommend companies that can be resuscitated and assist to capitalise. There is also a need to identify sectors that have potential for growth.
Agribusiness Value Chain
This is a sector which has got potential for growth. As a country we have comparative advantage in this sector. Zimbabwe generally is an agro-based economy and most of the raw materials in the agribusiness value chain are local.
There is also a perception that says Matabeleland is a cattle region and as such, whenever you are talking about agribusiness it must be something only to do with cattle ranching. The region is no longer leading in cattle production and as such must also push for crop production. It is always argued that in this region there is poor soil and poor rains.
There is nothing like poor soils but poor farmers. What this region needs is to build dams and irrigation schemes. Once there is water, the soil will be tested and the right fertilizer is applied. Those who want to entertain the issue of poor soil, how about Israel a desert being a net exporter of food?
Regional comparative advantages
The other areas where the region has comparative advantage are mining and mining value chain, services, tourism, infrastructure and housing sector.
Infrastructure and housing sector need a special mention as we consider them as sectors capable of changing the fortunes of the region.
Infrastructure is an enabler and all the sectors need good roads, good rail network, communications, and water and sewer reticulation. In addition, these sectors create a lot of employment. I am mostly interested in the housing sector. A massive housing project has a lot of downstream benefits.
Firstly, it will create a lot of employment during construction. Secondly, it will result in the revival of a number of other sectors. For example, there will be need for bricks, cement, timber, steel and other materials thereby further creating employment.
After completion of the houses there will be need to buy furniture which will help grow the furniture industry. Financial service sector will in turn benefit as houses will be insured and in some cases they will be mortgaged.
There is need to revisit or re-introduce the Distressed Industries and Marginalised Areas Fund (Dimaf) model. This time it should target companies that demonstrate that there are not economically distressed but only financially distressed and can demonstrate that the business is viable and can repay the loan.
The Government should consider introducing venture capital companies whose role is to invest in the distressed companies and disinvest when they have been revived. Small Enterprise Development Corporation (Sedco) should also have a venture capital unit instead of just lending money. They should invest in some companies and move out when they have been turned around.
The Industrial Development Corporation (IDC) should revisit its mandate. Instead of running companies in perpetuity, they should invest in distressed companies and ensure that they disinvest. IDC has interest in a number of sectors of the economy including Zimbabwe Copper Industries, Willowvale Mazda Motor Industries, SINO Zimbabwe, Chemplex Corporation, Motira Holdings, Almin Metals, Olivine Industries, Allied Insurance, Sunway City among other companies. IDC being a state enterprise, it would be superlative that they disinvest in most of the above companies and concentrate on their original mandate of reviving ailing companies. On infrastructure, the Infrastructure Development Bank of Zimbabwe (IDBZ), has done well in Masvingo, Kasese in Kariba, Harare and Hwange but has not been active in Bulawayo. Bulawayo City Council should engage IDBZ and NSSA to develop infrastructure and housing in Bulawayo. The only financial institution, which has been active in Bulawayo, is Old Mutual/Cabs.
Finally, I submit that in order to revive Bulawayo, all stakeholders need to work together to identify the problems that created this situation. The issue of dealing with symptoms cannot help the city to turn around.
Obert Sibanda is a prominent businessman based in Bulawayo and former president of the Zimbabwe National Chamber of Commerce. He writes in his personal capacity and can be contacted on 0772252088 or email [email protected] <mailto:[email protected]>