adminSpeaking at an Access to Bank Credit Strategic meeting organised by Zeparu, chairman Mr Mike Ndudzo said while industry is committed to increasing output, the lack of credit lines was hindering efforts to compete in regional markets.
“We need to have our own savings in order to complement the Foreign Direct Investment that we are getting. Industry is currently handicapped by lack of credit availability which is leading to unavailability of raw materials,” he said.
“There is also need to find a commodity type of financing which we currently do not have in Zimbabwe.”
Participants bemoaned the high level of imports which have led to a trade deficit for Zimbabwe.
Imports far outweigh exports and this emanates from lack of funding to the private sector.
The poor performance of the private sector has also been a big concern since it is still emerging from a period of hyperinflation and needs financing for capital and working capital.
According to a study by Zeparu on access to bank credit, credit remains a key determinant of performance, given limited ability of shareholders to inject funds.
The report, “Access to bank credit as a strategy to re-industrialisation in Zimbabwe: The issues”, was officially launched during the meeting yesterday.
The study shows that the local private sector mainly relies on local banks for support but the financial sector is incapacitated to play its traditional financing role due to limited lending capacity.
Generally, firms have five sources of finance – banks, equity, self-finance, supplier credit and informal finances. It has been observed that there is a tendency to over-rely on banks for operating finances.
According to the study, another critical challenge is that Zimbabwean firms have to pass creditworthiness tests to get access to bank credit.
Factors that determine creditworthiness include growth prospects, capital requirements, competitiveness of the environment, diversification and ownership structure, cash flow adequacy, capital structure as well as profitability.
The findings by Zeparu show that while the economy boasts vast resources, facilities to explore them were hindering efforts to boost economic growth.
Zeparu also noted that while the economy is projected to grow by more than 5 percent this year, Government might slash the initial targets due to limited funding.
Furthermore, access to offshore facilities is considered an important element in restoring the nation’s competitive edge against other countries.
But in the short to long term, Zeparu says Zimbabwe has a potential to become a key player in attracting investment provided macro-economic constraints are addressed.
In a related development, Zeparu will soon be coming up with a policy document outlining workable solutions to challenges affecting productivity in the country.
Online Reporter