HomeLettersByo industry fund ‘a pie in the sky’

Byo industry fund ‘a pie in the sky’

More than 20 000 workers had been left jobless when Bulawayo industry ground to a halt and job opportunities in the city had virtually come to naught.
But prospects of revival have remained a pipe dream as months have passed by with no movement on the ground since only three out of 58 companies, which applied for financial assistance, have managed to access the fund.

The major challenge in reviving Bulawayo’s decimated industry are the cheap Chinese products flooding the Zimbabwean market, squeezing most local manufacturers out of business as more consumers in the low-income bracket opt for these imported goods.

Archaic machinery, equipment and high electricity costs are part of a raft of challenges which forced the city’s 87 firms to shut shop while others relocated to the capital Harare. So the US$40 million sourced by the cash-strapped coalition government and Old Mutual had come as a relief to the failed entities but the situation on the ground remains the same. The trouble is some of the companies which need to be revived can no longer cope in the changed business environment or survive the influx of cheap foreign goods.

Over the years, goods produced by local industries remained unchanged for decades despite rapid business model and technological changes in the global economic landscape.

This has, in some cases, made locally-produced goods more expensive than imported goods mainly because of high production costs. Given all these challenges, reopening industries which produce the same products as those flooding the market would be a futile exercise.

The same companies being resuscitated will at some point have to shut down again since it doesn’t make business sense to operate factories producing expensive goods when they are cheaper alternatives.

In the frontline years, Bulawayo used to boast of mass-employing firms such as Merlin, National Blankets and Monarch, which used to produce goods both for the local and international markets.

Analysts, however, say most of these companies and their products have now been overtaken by events, including the rise of China as the world’s second largest economy.

Flourishing flea markets selling cheap imports, which started mainly in the mid-1990s, have  adversely affected locally-produced products.

This has gradually eroded the competitiveness and viability of local industries, mainly in Bulawayo which used to thrive because it was a link between industrial hubs like Hwange and Redcliff when Ziscosteel was still performing well. Bulawayo, the headquarters of the National Railways of Zimbabwe, was the nerve centre when such companies were thriving.

Bulawayo-based economist Eric Bloch said although the fund’s recipients could use the US$40 million on upgrading their archaic machinery, the fund was just a drop in the ocean since over US$1 billion is actually required for the purchasing of new equipment and setting up of new relevant companies.
He said the US$40 million was only enough for reviving existing companies which employed thousands of workers.

“During the first phase of Dimaf, it’s important to revive companies then in the second phase people can talk about mordenisation because US$40 million is not adequate for such a huge task,” Bloch said.

He added that Dimaf was likely to be a failure after it took more than five months for companies to access capital and the terms for firms to qualify are stringent.

Former Zimbabwe National Chamber of Commerce president Obert Sibanda said the US$40 million could not finance the cost of reviving the city’s  huge ailing industrial zone.

“Buying new machinery requires a lot of capital and in this case Dimaf is not adequate. For now, companies want to boost production and employ workers,” said Sibanda.

Bulawayo mayor Thaba Moyo said the priority should be focused on reviving existing companies because opening new firms was a daunting task given the limited financial resources, a view which some say needs to be interrogated given the changes in terms of the global economic structure and markets.

“We want to see the over 20 000 employees who were affected by the company closures back at work. The rest will follow,” said Moyo.

He said the Bulawayo Development Association headed by Bloch was also in the process of organising an indaba for all businesses and potential investors drawn from across the globe. Details of the investors’ meeting are still sketchy but the indaba is aimed at encouraging investment in Bulawayo.

“The slow pace of the disbursement of Dimaf is discouraging and thus we will look at ways of stirring economic growth,” said Moyo. However, given the current political and policy uncertainty attracting investment is always an arduos task.

Bulawayo based socio-economic commentator Chamu Mutasa said it was prudent for Bulawayo firms to adjust  and compete for markets.
Even though some Chinese goods and those imported from the Sadc region may be sub-standard compared to those produced locally, the fact is they are affordable.

Mutasa said the prohibitive conditions set by CABS, which is responsible for disbursing the fund, were hampering Dimaf

Only firms which can afford collateral of US$150 000 can access the fund, even though some are applying for only US$100 000. This further complicates an already problematical situation, analysts say.

The bank has stated that other minimum requirements for companies to qualify for the funds included a “minimum of two years accounts (management accounts or financial accounts) audited if possible, acceptable collateral, projections for capex (capital expenditure) loans covering the tenor of loan (12 months), budgets and cash flows and turnaround strategies as well as a business plan”.

“The stringent conditions for accessing the money are not helping the situation  situation. Business is losing faith in Dimaf. It’s just a pie in the sky,” said Mutasa.

Sibanda said government has failed to treat the revival of Bulawayo with the urgency while  most companies were bleeding. He warned the number of closed firms would increase if the crisis is allowed to deepen.

“Conditions set by CABS are not to cater for distressed companies; they are for viable firms,” said Sibanda.

Bulawayo governor Cain Mathema has attacked Finance minister Tendai Biti and Industry and Commerce minister Welshman Ncube over the delays in releasing Dimaf funds.

Dimaf has become a battleground for the main political parties jostling for votes ahead of the next elections, but in the meantime its Bulawayo and its people suffering.

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