3 February 2014

Zimbabwe: 'Sound Proposals Key in Getting Chinese Funding'

LOCAL firms should submit sound and bankable investment proposals to obtain funding from Chinese banks, Industrial Development Corporation has said.IDC general manager Mr Mike Ndudzo last week told a Parliamentary Portfolio Committee on Industry and Commerce last week that most firms were not getting funding from China because they were presenting "shopping lists" instead of sound proposals.

"If we go to China with projects that are well thought out financially, we can get as much money as we want. The soundness of the concept of your project is the basis upon which, as an investor, I would take risk," Mr Ndudzo said.

While IDC is trying a number of initiatives to secure funding to support its subsidiaries and associate companies, the firm says without significant external funding inflows, turning around the economy will take much longer.

IDC borrowed the initial capital of US$15 million used to start Gweru-based Sino-Zimbabwe Cement Company and the US$29 million used to start and recapitalise oil expressing firm Surface Investments from a Chinese bank.

As such, Mr Ndudzo said local firms should not submit "shopping list" kind of investment projects to Chinese banks. He said one of the Chinese banks said that local firms were failing to submit proposals that make sound economic sense.

IDC is now seriously putting together investment project proposals to seek funding for its other projects from Chinese banks. Mr Ndudzo said IDC will focus on projects with a higher return-risk profile.

He said while Zimbabwe has a high country risk profile, sound and bankable projects with a high rate of return on investment can get foreign financial support.

He added that firms should conceive sound and bankable projects considering the fact that funding always follows sound investment ideas.

IDC requires huge capital outlay to recapitalise its expansive industrial projects and will be selling off and diluting some of its investments to raise funding.

The third option will be development of projects with good prospects. Lack of access to affordable domestic or foreign long-term funding has resulted in companies using old, antiquated equipment and inefficient equipment.

This means the cost of production becomes high, which erodes the firms' competitiveness resulting in less demand, viability constraints and eventually, downsizing and in extreme cases closing down resulting in job loses.

After IDC's presentation the Committee's chairperson Mr Ray Kaukonde said that the country should urgently set up a national committee to find ways of raising external funding.

He said there was urgent need to raise funding to support productive sectors of the economy, especially manufacturing, agriculture and mining.

Mr Kaukonde said there was need for establishment of a national committee that can engage Finance and Economic Development Minister Patrick Chinamasa on possible ways in which the country can raise funding.

"We need to sit down with Minister Chinamasa to discuss the reality on the ground. We need to support Minister Chinamasa to achieve targets and objectives in the Zimbabwe Agenda for Sustainable Socio-Economic Transformation."

"Industry has got challenges of old equipment that needs to be replaced to become competitive and we need to find cheaper funds. We have to engage the owners of companies to see how we can equip them to produce quality goods."

He said merging operations, as proposed for IDC' Olivine and Surface Investments, to overcome funding challenges was not a solution if there is no fresh capital.

"We should look at ways of raising money for the country and even for individual companies because in the end it benefits the country," Mr Kaukonde.

Mr Kaukonde said the country should also not simply resort to protectionism where inefficiencies are too high because of old equipment; as such he said there was need to find stop gap measures and establish committee to find ways to minimise the impact of sanctions.

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