IDCZ should prioritise funding SMEs

Business Reporter

THE Industrial Development Corporation of Zimbabwe (IDCZ) should prioritise credit to small and medium enterprises (SMEs), particularly focussing on value-adding industries, one of Zimbabwe’s influential business lobby group said.

SMEs now constitute more than 60 percent of private enterprises in Zimbabwe but suffer from the acute lack of affordable long-term financing, business management skills, collateral for bank loans and appropriate infrastructure, among others.

IDCZ is a self-financing industrial development and financing institution (DFI) established in 1963 through an Act of Parliament (Chapter 14:10).

Wholly owned by the Government, the IDCZ’s role in the economy is to promote industrial growth by investing in new industries and supporting the growth of existing industrial enterprises to create wealth, employment and drive economic growth.

IDCZ is among several Government entities earmarked for privatisation and reform.

In its 2024 state of industry and commerce survey report, the Zimbabwe National Chamber of Commerce (ZNCC) said the IDCZ should prioritise unlocking funding from international financiers.

“We recommend that IDCZ loans be provided at concessionary rates to enable the upgrade and modernisation of industrial equipment and processes, thereby enhancing productivity and competitiveness,” ZNCC said.

ZNCC said the IDCZ should prioritise unlocking funding through international financial institutions (IFIs) such as the African Development Bank (AfDB) and the African Export and Import Bank (AfreximBank).

“This approach is critical, as the capital requirements of most players in Zimbabwe’s industrial sector are significantly smaller than the minimum thresholds for direct access to IFI financing.

“By acting as a conduit for these funds, the IDCZ can ensure that businesses benefit from these resources, fostering industrial growth and economic resilience,” reads the survey.

In February this year, the Government received financing from the African Development Fund toward the cost of the Institutional Support for State Enterprises Reform Project (ISSER) and intends to apply part of the funds towards a performance review of IDCZ and the development of turnaround strategies.

ZNCC said SMEs, which dominate Zimbabwe’s private sector, often face high input costs due to small quantities; hence, by forming consortia or cooperatives to purchase raw materials and other inputs in bulk, these businesses can benefit from economies of scale and reduce per-unit costs.

The business and commerce representative said the Government could support this through policies that facilitate bulk importation of key raw materials with reduced import duties for consortium members.