However, with the lapse of time, that entity has proven itself to be a pronounced non-event. Clearly Dimaf is actually an acronym for “Don’t Imagine Monetary Assistance is Forthcoming”, for, despite the immense urgency for industry to be assisted in endeavours to revive, nothing has been forthcoming from Dimaf, and industry is declining ever more.
The fund is endowed with a total absence of substantive action, over and above the fact that the quantum of the fund is ludicrously low. In total, its funding is apparently a niggardly US$40 million. In reality, the needs for a substantive recovery of industry are at least US$2 billion, of which at least US$1 billion is required for those industries situated in Bulawayo, if a comprehensive recovery is to be achieved. Of the token funding being provided for industrial revival, half has been availed by government’s beleaguered and emasculated Treasury, and half by Old Mutual.
Indications are that, because the funding is so minuscule, the maximum assistance as will be given to any one industrial applicant is US$500 000 and in most instances very considerably less. But for many industries, if they are to be revived and are to survive, the funding needs are markedly greater.
Provision of inadequate funding equates to a critically ill patient being given a quarter of a medical tablet, when the prescribed dosage is two of such tablets. As a result, the patient either remains ill, or dies. This too must be the consequence of industry being given inadequate funding, as against that necessary to achieve a significant recovery.
The processing of applications for facilities from Dimaf is another of the fund’s negative features, months are elapsing without applicants receiving any advice as to the outcome of their applications. Meantime, in anticipation of receiving much-needed recovery funding, the industries struggle on, endeavouring to remain operational, with their circumstances ever-worsening and their losses intensifying.
And it is not only those industries that are confronted by the intensifying operational constraints, but also their employees, who cannot be adequately remunerated, as well as the employees’ families and dependants. Suppliers remain unpaid for goods and services, thereby jeopardising their survival. The economy continues to contract, consumers are deprived of access to essential commodities, and revenue flows to the fiscus are minimised.
Despite the as yet non-distribution of funds by Dimaf, indications from information given to applicants suggests that the terms and conditions of funding to be provided are out of touch with realities. The fund’s administrators have intimated that any funding provided will be repayable within 12 months. That is an unreasonably curtailed period for most distressed industries.
On receipt of the funds, the manufacturer has to place orders for inputs from suppliers, and await delivery thereof. Concurrently, he must solicit customers’ orders. Once the inputs have been received, the products must be manufactured, despatched to customers, and payment for those goods awaited, whereafter the manufacturer must repeatedly engage in the same cycle of operations.
Each such cycle can take many months, and only progressively as it is repeated does the manufacturer begin to regain viability and accumulate funding required to repay borrowed money and to continue operations. Although this may be variable from one enterprise to another, most manufacturers require two to three years to regain total operating security, including repayment of loan funding and accumulation of working capital for future operations. As a general rule, the realistic and ideal terms of Dimaf funding should be loans of an overall three-year tenure, with staggered repayments quarterly from the commencement of the second year.
Yet another unrealistic condition and constraint being prescribed in order for a company to be considered for a Dimaf facility is that the applying manufacturer must be wholly up to date in servicing payments to the Zimbabwe Revenue Authority (Zimra). Although all enterprises are lawfully obliged to effect timeous, full payment to Zimra of taxation liabilities, and although the enterprises that have sustained operational losses do not incur income tax indebtedness, they do have the obligation to pay fully all Pay As You Earn (Paye) pertaining to employees’ remuneration, and Value Added Tax (Vat) on sales.
But when the business has very severe cash flow constraints, to an extent that it cannot even pay its employees fully when payment is due, it cannot fund the payments to Zimra. How can it remit tax on unpaid employee earnings prior to being able to pay such earnings? And how can it remit Vat before receiving payment from customers?
Indications have also been forthcoming from the Dimaf administrations that applications will only be considered in respect of enterprises which have large labour forces, in order to maximise employment continuity. This is an ill-considered and destructive policy, for there are many industrial operations which have small or medium sized labour forces, but which have immense importance to the economy (and, in time, can employ significantly greater numbers).
They produce goods which would otherwise have to be imported, with concomitant inflationary impacts. They beneficiate the economy downstream, including large-scale employers who provide the manufacturing inputs and support services needed by the manufacturer. As they progressively regain viability, they once again become a meaningful source of inflows to the fiscus.
The Fund’s administrators also need to be realistic and flexible in their requirement that borrowing industries should provide security for the Dimaf loans. Not all companies have immovable property which can be encumbered in favour of the fund, save in some instances by way of a second bond, their property (if they have any) already being encumbered by a first bond.
Contingent upon the amount being provided by the fund, and the nature and financial circumstances of the intending borrower, most such borrowers are able to provide alternative reasonable security, such as general covering bonds over plant and machinery, and other moveable assets, cessions of debtors, supportive guarantees, and the like.
If Dimaf is to fulfill its intended objective of saving troubled industry and aiding its recovery and growth, it is essential that it be adequately funded to a far greater extent than a niggardly US$40 million. It needs to process applications rapidly, with reasonableness and real understanding; it must not impose untenable conditions and must provide for the duration of funding provided to be apposite to the entity’s needs, on economically practical and reasonable terms.
If it is so transformed, Zimbabwe in general, and Bulawayo in particular, will progressively attain former industrial heights, and even greater ones, and the economy and the Zimbabwean people will be the beneficiaries thereof.