Q&A: Trade facility negligible

The Confederation of Zimbabwe Industries (CZI) and the Zimbabwe International Trade Fair (ZITF) will next month hold an original equipment manufacturers (OEM) conference. In this question and answer with the Zimbabwe Independent, CZI president Busisa Moyo speaks on the idea behind the conference and expected outcomes.

Find excerpts below

What is the importance of the OEM conference to industry?

It is coming on the back of a realisation that the industry needs to go through a retooling exercise. A lot of our equipment is outdated and obviously need an upgrade.

Because we needed an upgrade it is important for us to engage or at least provide direction and contact to original equipment manufacturers for various sectors so that we can engage them with a view for retooling so that the financial services sector that supports the acquisition of new equipment can also understand the dynamics.

Is this the first time that you are bringing the OEMs to this conference?

Yes and no because in old days the trade fair naturally attracted the original equipment manufacturers. We used to have that in the 80s and 90s but now we haven’t seen that in a while.

So we want to revisit that model of having these original equipment manufacturers. So in a long time, for some people yes this is the first time we are having these OEMs.

How many OEMs have so far confirmed participation?

We don’t have details but I can tell you that the countries that we have invited, through the embassies and through direct contacts are South Africa, Germany, Italy, France, Japan , India, China and Brazil.

They come sometimes under the Embassy, as a group or as an association. We have already hosted a Germany delegation of OEMs that came through last year.

Which countries are the speakers at the conference coming from?

We are bringing speakers from South Africa, some local speakers, one or two international speakers for the OEM breakfast and obviously our government officials who have been spearheading the retooling agenda under their industrialisation programme.

How do you compare the state of industry’s machinery to regional neighbours?

I will give you a mixed response because South Africa is usually ahead technologically, Zambia is coming up, Mozambique is still behind, and Malawi is behind us. Congo is even further behind.

Zimbabwe has a chance to be a leader outside South Africa in terms of up to date technology. This is what we want to take advantage of. We are already geographically positioned to supply Mozambique, Zambia, Tanzania and Malawi.

So, we want to take advantage as the best next alternative outside South Africa if not the leader in the region because South African equipment is becoming a little bit outdated.

Is there a study carried out on the state of machinery?

Yes. It was done two year ago and its shows that most of the equipment in industry is 15 t 25 years old.

Which of the sectors requires urgent attention in terms of bringing in new technology?

I can start by talking about our value chain. CZI has identified 18 value chains these range from soya to white meat which involves the crop growing side, soya beans crushing, oil expressing, stock feeds manufacturing , chicken rearing, poultry rearing.

So whenever we are talking about equipment, we want to look at a value chain to say the whole value chain must be efficient. It doesn’t help to have an oil expresser who is very efficient and everything to the left and right of the value chain is inefficient.

A value chain approach is very useful in addressing these issues.

What has been the impact of facilities such as the Distressed Marginalised Areas Fund (Dimaf) and the Zimbabwe Economic Trade Revival Facility (Zetref) that was put in place to help companies retool?

The impact of Zetref and Dimaf has been very negligible for various reasons. Number one, the size of funding made available under Dimaf was very small.

Companies were given $200 000 when they needed $2 million, they were getting 10 to 15% of what they need.

So the magnitude of intervention was too small. Secondly, the structure of financing was incorrect.

When you are looking at the structure of funding for retooling you need a moratorium which is 9 to 12 months where there are no interest payments.

With Dimaf, the very month that they gave you the fund, 30 days later they knock on your door asking for interest and you say I haven’t even received the proforma for equipment I want because engineers are trying to work out how much this plant should cost.

The third one has to do with the criteria. We were funding specific companies. We need to look at value chains. You must rather have an intervention that then look at the whole value chain. Some got money and that money went to salaries.

The other thing is that the interest rates were very high, as high as 36% which is unworkable.

What are the funding options?

There is loan financing, the key feature there is a moratorium 12 to 18 months for repayment of interest. Two, operating finance leases where companies come in with lease financing. Hire purchase which is less favoured in this market is another option. Then there is structured financing where you recover the cost of the equipment per tonnes used basis and joint ventures.

Have financial institutions been supportive of local industries?

The answer is no but we cannot blame them. As industry we need to get out of our comfort zones and communicate clearly and convincingly what structure we need and financial services sector can respond. Part of the OEM’s breakfast is to have a financing component.

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