The Sunday Mail
THE country’s manufacturing sector needs at least US$8 billion for working capital and retooling to prevent further collapse of firms that are currently plagued by an unrelenting liquidity crunch and softening consumer demand.
Industry is currently operating at 39,6 percent capacity, down from 45 percent in 2012.
The manufacturing sector contributes about 16,5 percent to the country’s gross domestic product (GDP) and is forecast to grow 3,2 percent this year.
A huge external debt estimated at about US$11 billion has made the country unattractive to international finance.
Lines of credit for industry, where available, have been available on short-term basis and attracting punitive interest rates.
Confederation of Zimbabwe Industries’ (CZI) president Mr Charles Msipa said last week the country needs to mobilise substantial amounts, with US$5 billion earmarked for replacement of obsolete equipment for the economy to grow.
“Estimates have ranged between US$5 billion to US$8 billion, while some companies have already managed to retool using shareholder funds or medium-term funding provided by PTA Bank and Afreximbank; some benefited from the Distressed Industries and Marginalised Areas Fund (Dimaf), but the vast majority of companies have not been able to access such funding,” said Mr Msipa.
Government has made $70 million available through the Zimbabwe Economic and Trade Revival Facility in partnership with Afreximbank to help financing, retooling and recapitalisation of manufacturing projects with export potential and US$40 for Dimaf from Old Mutual.
He said there was need to mobilise Foreign Direct Investment (FDI) to ease the impact of liquidity crisis that is pushing up the cost of funding.
“In addition to other factors that have been previously highlighted such as access to affordable financing and infrastructure deficits, manufacturing also impacted by progressive weakening of South African rand versus United States dollar , which has further eroded competitiveness of local manufacturers versus SA manufacturers in domestic and export markets,” said Mr Msipa.
CZI president said the galloping recovery growth, averaging 7,1 percent per annum witnessed since dollarisation in 2009 to 2012, had moderated and the country requires FDI hence the private sector-led efforts would first be targeted at the EU where most of the FDI in the sector comes from.
Out of a total of the US$93,4 million project proposals approved by the Zimbabwe Investment Authority for the first quarter for the year ending March this year, US$22,5 million worth of investment for eight projects were for the manufacturing sector.
Mr Msipa said players in the manufacturing sector were keen to see the Government speedily implementing the ZimAsset economic blueprint, a move they say will address challenges of capacity utilisation.
“At national policy level, ZimAsset blueprint correctly identifies value-addition and beneficiation as a strategic priority for re-industrialisation, and CZI has been involved in organising public workshops on ZimAsset in Bulawayo, Harare and Mutare to promote awareness, understanding and to encourage interrogation of the blueprint by all stakeholders.
“At individual company level, the key agenda items are on improving efficiencies, eliminating waste and reducing costs to improve competitiveness, and for those that are export-oriented, on identifying and penetrating alternative markets for exports,” said the president.
While the Government has projected an optimistic 6,1 percent growth rate this year, it is becoming increasingly clear that the target will most likely be missed as the economy.
However, CZI says it has been engaging Government in a bid to resuscitate the ailing industry.
“CZI has ongoing and productive collaboration with various Government departments, primarily Ministry of Industry and Commerce on barriers and enablers to revival of industry.
“Various policy interventions have been initiated to support industry, including DIMAF, measures introduced in the 2014 National Budget for protection of certain sectors against imported products.
“The most significant support we can expect from Government is consistent and coherent articulation of policies that increases the ease of doing business in Zimbabwe, increases confidence of local and foreign investors in our economy as well as reduces country risk that is a barrier to capital inflows into Zimbabwe,” said Mr Msipa.
However, the Master of the High Court’s roll reveals that scores of companies are applying for judicial management, voluntary closure and liquidation as provided for by the Companies Act, a sign that the industry is in dire need of funding.
Nearly 100 companies have closed down in the country’s second capital city Bulawayo since 2010, putting out of work an estimated 20 000 workers, with the remaining companies scaling down their operations or relocating to Harare.
Most companies that reported results for the year ending December 2013 have showed subdued revenue growth as well as losses.
Meanwhile, Confederation of Zimbabwe Industries’ (CZI) Bulawayo chapter is lobbying Government to consider the city a special economic and industrial zone in order to boost capital inflows and improve productivity.
Bulawayo used to be the country’s industrial hub.
CZI recently submitted a dossier to Cabinet highlighting key incentives needed for companies in Bulawayo to weather the current economic storm.
Matabeleland Chamber of Industries president Mr Busisa Moyo told The Sunday Mail Business last week that declaring Bulawayo as a special economic and industrial zone would allow new and existing companies to access incentives that enable them to restructure and grow.
“We can use the strategic location of Bulawayo along a rail network to value add raw materials from within Zimbabwe and input from South Africa for export to Botswana, Zambia and other northern markets,” he said.
The existing legal framework makes it hard for companies to restructure.
Over the past decade, local companies have been reeling from capital constraints, low investor confidence and lack of foreign direct investment.