HomeBusiness DigestIndustry in dire need of capital injection –– Ncube

Industry in dire need of capital injection –– Ncube

LACK of long-term international lines of credit, punitive interest rates charged by local financiers, coupled with erratic electricity supply is threatening the recovery of the manufacturing sector currently operating at 35% capacity.

Industry and Commerce minister Welshman Ncube on Wednesday told captains of industry in Bulawayo that urgent long-term capital injection was needed to increase capacity utilisation to save the sector from collapsing.
“The continued lack of long-term lines of credit from local, regional and international financiers is threatening the recovery of the manufacturing sector and this is the most single challenge to us,” said Ncube at a Zimbabwe International Trade Fair business conference.
He said industrial capacity utilisation has been stagnant at 35% since last October.
The local financial sector, the minister said, was not helping matters by providing short-term loans which attract high interest rates. 
“The local financial sector has been able to provide short-term finance relatively adequate though expensive,” he said. “They are not able to provide reasonable priced loans to industry yet they require industry to repay within three months.” 
Ncube said in Botswana and Zambia interest rates were about 5% compared to 20% locally, which is discouraging borrowing.
To remedy the situation, Ncube said, his ministry and that of Finance were engaging international financiers to provide long-term lines of credit.
“We are working with Finance ministry to engage regional and international financiers with the view of availing long-term lines of credit,” he said.  “Currently we have firm commitments that they are willing to help us and that will save the manufacturing sector.”
On intermittent power electricity cuts, Ncube said by October “reliable energy supply would be available to industry”.
The extended power load-shedding programme countrywide is attributed to a power shortfall due to generation problems at Hwange Power Station.
Due to the power outages, companies are reported to be producing lower than 10% of their required capacity.
The companies are now forced to buy generators that are more expensive than electricity thereby increasing production costs resulting in local goods being more expensive than imported ones.
Ncube said the constant power cuts were causing extensive damage to most machinery which industry had to repair or completely replace. equipment,
However, Ncube said high production costs render locally-produced goods uncompetitive in the region.
“Production costs have to be looked into because locally-manufactured goods are not only expensive here but are uncompetitive in the Sadc and Comesa regions,” he said.
lMeanwhile, 28 prospective local airline operators are still to hit the skies years after being granted licences by government.
The licences where granted as far back as 2005.
Tourism and Hospitality minister Walter Mzembi told delegates to the business conference at the Zimbabwe International Trade Fair in Bulawayo on Wednesday that it was only “discovered” last week that 28 licences that were issued to black businesspeople were lying idle.
“I discovered last week when I was drafted into an Air Zimbabwe committee that since 2005, government has granted 28 aviation licences to local black businesspeople,” Mzembi said. “However, they are still to take off and it could be for speculative reasons just like in the mining sector.”
He said a thorough investigation would be carried out to ascertain the reasons behind the non-utilisation of the licences.
This comes at a time when government is slowly implementing the open skies policy seeking to have more aviation players on Zimbabwe’s airspace.
Currently only two local airlines, the ailing national carrier Air Zimbabwe and a new entrant Fly Kumba are operational.

 

Nqobile Bhebhe

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