‘US$4bn is needed by industry’

LOCAL industries need a US$4 billion resource envelope to retool, buy raw materials and build from the foundations of Government’s import restrictions, according to the Confederation of Zimbabwe Industries (CZI).

Companies are struggling to attract fresh capital and lines of credit due to illegal sanctions imposed by the United States of America (USA) and the European Union bloc, which have increased the country’s risk premium.

Investors have therefore been increasingly risk averse.

Equity investments have also been largely elusive.

CZI vice president Mr Sifelani Jabangwe told The Sunday Mail Business that industry needs fresh capital to meaningfully contribute to the economy.

“We are pleased with the progress of SI 64 so far; it has brought life to many sub-sectors of the economy like cooking oil, flour, rubber, plastics, yeast, monarchs and detergents among others…

“Consequently, overall capacity utilisation of the industry has risen to above 50 percent, but for industry to get back to its feet again, we require at least US$4 billion.

“The amount will help to retool and re-equip the manufacturing industry, as most machinery is now obsolete and outdated; strengthen value chains and foundations laid by SI64.

“We will engage the monetary authorities and international creditors like Afreximbank and PTA, among other lending institutions, to get the funding,” said Mr Jabangwe.

Industry maintains Government needs to continue improving the ease of doing business in order to attract meaningful investment.

The country’s debt overhang at more than US$10,7 billion has also been a drag on the economy as it has seriously undermined the country’s creditworthiness.

University of Zimbabwe senior economics lecturer Professor Albert Makochekanwa said last week it is an inescapable fact that fresh capital is definitely needed to jumpstart the economy.

“I am not so sure of what is required to resuscitate the local industry — It may need US$4 billion or US$10 billion — but we certainly need a fresh injection of capital to improve our industry.

“Whether we get it through foreign direct investment or other means, but we need the capital to revive the local manufacturing sector.

“In my own view, we should go for joint ventures and partnership in order to get funding for our industry…

“All I am saying is that through partnerships and joint ventures the local industry can go a long way in replacing obsolete machines, buying new equipment and improving state of operations at the company,” said Prof Makochekanwa.

Government has since revived the Distressed Industries and Marginalised Areas Fund (Dimaf) and doubled it to US$40million to make it available to as many companies as possible.

Through the fund, beneficiary companies will get concessionary interest rates of less than 10 percent.

Government continues to engage international financiers such as the International Monetary Fund (IMF) and the World Bank to normalise relations.

The public and private sector used to benefit from the International Finance Corporation (IFC) and the International Development Association (IDA) — both arms of the World Bank Group — but souring relations after 1999 resulted in a collapse of relations.

It is however hoped by clearing the country’s arrears, normal relations will be restored.