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GOVERNMENT intends to come up with a new fund to provide financing to distressed manufacturing companies, Industry and Commerce Minister Mike Bimha said yesterday. Investors in the new fund will include local pension funds and insurance companies as well as regional and friendly international partners.
Negotiations with partners, including the National Social Security Authority, would be complete by the end of next month.
“We are engaging with a number of local, regional and international institutions so that we come up with some form of rescue funding instrument meant to recapacitate the manufacturing sector,” Minister Bimha said in an interview.
“The negotiations will also discuss in what form the funding packages will come and how they (the finances) can be accessed by those distressed companies. Hopefully, by next year we should have an operational facility to this effect,” he added.
Minister Bimha could not say how much the Government intends to raise. But about US$2 billion is needed to capacitate the industry, according to the Confederation of Zimbabwe Industries. Previously, the Government established two facilities, the Zimbabwe Economic and Trade Revival Facility and the Distressed and Marginalised Areas Fund, to avail support to struggling companies at concessionary rates. In total, the facilities were supposed to avail US$110 million in company revival funding this year. But only US$41,7 million out of approved applications valued at US$71,8 million, had been disbursed.
Under Zetref, a US$70 million joint venture facility between the Government and the Africa Export and Import Bank, only US$17 million was disbursed between January and September this year out of the applications worth US$39 million which were approved.
And under Dimaf, a US$40 million facility between the Government and Old Mutual, a total US$24,7 million was disbursed against applications worth US$32,8 million approved.
The two facilities are available to companies across all sectors of the economy through selected financial institutions. Zimbabwe remains unattractive to international financing, largely due to external debt estimated at about US$11billion. This has resulted in the unavailability of sustainable long-term funding with the available short-term loans being too expensive to assist industry.
Depressed investment into the country has resulted in the country’s manufacturing base shrinking to the extent of reducing the country into a nation of traders. This has resulted in the country importing much more than it exports. The net effect of this has been a debilitating liquidity crunch which has worsened the operating environment for companies operating in Zimbabwe. The liquidity crunch which started towards the end of 2011 has gradually worsened in 2013 resulting in several companies collapsing and many more struggling to meet their costs especially staff costs.
Company closures have hit all sectors of the economy. Several reports have been received of company closures in Zimbabwe in the last three years with increased closures in 2013.
The July 2013 National Social Security Authority Harare Regional Employer Closures and Registrations Report for the period July 2011 to July 2013 shows more than 700 companies in Harare closed down, rendering 8 336 individuals jobless.
Past president of CZI Mr Kumbirai Katsande said in an interview yesterday the on-going negotiations for fresh funding for the manufacturing sector was a welcome development.
“If this can be done (mobilising funding) then we are fully behind the Government on its efforts, as you might know, the manufacturing sector feeds into most sectors especially agriculture whose raw materials come mostly from manufacturing.
“By recapacitating the sector, it means agriculture would also positively benefit and this can go a step further in ensuring that the much needed value addition in economic revival can also be realised,” he said.
Online Reporter