23 January 2013

Zimbabwe: Industry Rescue Packages in Limbo

As industry burns, the impact of the various government programmes put in place to save the situation is still to be felt.

In 2011, government launched the Zimbabwe Economic Trade Revival Facility (ZETREF) and the Distressed and Marginalised Areas Fund (DIMAF) to resuscitate industry, but the take up has been slow.

Government also launched other initiatives to secure funds from regional and international financial institutions to support failing industries.

These included the 575 million rand facility with South Africa; the US$50 million facility from Angola; the 500 million pula facility with Botswana; the US$100 million line of credit from India; over US$2 billion Chinese investments and the Brazilian Food for Africa, among others.

Disbursement has been rather slow due to bureaucratic sloth at the disbursing banks and tougher lending conditions that have precluded many potential borrowers.

For example, from the US$70 million that was in the ZETREF basket as of December 2012, approvals amounted to US$53 million while disbursements stood at only US$27 million.

Also, from the US$40 million DIMAF project, approvals amounted to US$16,2 million, while disbursements were US$12,2 million.

Because most of the facilities were under-utilised, there are fears of more company closures and escalating job cuts.

The continued loss of jobs is posing serious headaches for the inclusive government, with President Robert Mugabe saying youth unemployment and under-employment presented one of the biggest challenges for the country.

Rising unemployment, if not addressed, has the potential of threatening national peace and stability.

In its latest report, the Parliamentary Committee on Industry and Commerce expressed disappointment over delays in disbursement of funds meant to resuscitate industry.

The committee noted that allowing industries to collapse through failure to service working capital loans was not good for the country's economy.

"If industry falls, revenue base falls and there is loss of employment. It is also important to note that shut down companies are difficult to resuscitate. Thus, the committee recommends the setting up of a scheme for buying off company loans or government guaranteeing firms loans, plus the collateral," reads part of the report.

The committee recommended that industry needed to be restructured as some of the technology still in use was now outdated following years of economic decline hence the injection of more funds alone would not result in their rivival due to technical inefficiency.

It said focus should also be on financing non distressed companies facing cash flow problems.

"Supporting collapsed companies does not make sense in some cases because they will fail to pay back the loans. Therefore a facility must be availed for such companies," the committee noted, adding that while the protection of local industry was being strengthened, the influx of foreign goods was worrying as the strength of industries lies in local demand.

It was thus recommended by the committee that government should support the "Buy Zimbabwe" campaign.

The report said ZETREF II would be rolled out this year with the Cairo-based Africa Export Import Bank (Afreximbank) availing another US$70 million towards the programme. Government would contribute US$30 million towards the facility.

The lawmakers were however, skeptical about the availability of the second Afreximbank tranche given that the first was not fully disbursed.

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