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The bailout that never came

ONE of 2020’s major highlights was a promise by the government in May that it would be rolling out a rescue plan to help industries manage pressures that stemmed out of Covid-19 inspired lockdowns.

SHAME MAKOSHORI

When President Emmerson Mnangagwa announced the package, industrialists breathed a sigh of relief, as production had been grounded by the historic work stoppage, which was also affecting other countries.

The crisis was, even during the period of painful closures, companies still faced the same bills including electricity and salaries.

Mnangagwa had laid out his plan soon after some countries had raced to take over up to 80% of corporate wage bills to save companies.

At the time, over US$5 trillion in state-assisted bailouts had been injected into private companies worldwide.

Neighbouring South Africa had pursued the same strategy, while across Africa other governments had chipped in to avoid an industrial catastrophe.

This was what Zimbabwe’s industries, which were already battling to forestall a dire crisis when the virus tore through, expected when the government said $18 billion (about US$220 million) would be at their disposal through an arrangement that included lifelines from banks.

Yet that was the last industrialists heard about it from the government.

Amid the terrifying experiences, the government launched a spirited propaganda campaign claiming that drawdowns of the Covid-19 stimulus had kicked off.

But with executives moving from pillar to post without success, tempers ran high.

And in October, industrialists asked Finance minister Mthuli Ncube to come out clean.

An explanation would help companies map out the way forward.

But it came with little clarity.

The Confederation of Zimbabwe Industries (CZI) said in a paper submitted to the government in October that they understood the minister had little room to manoeuvre, but it was important to keep them up to speed.

“Companies indicated that no funds were accessed under the rescue package,” the CZI indicated in its contribution to the 2021 national budget formulation.

“Other players have made indications to their bankers but they have not received responses yet — no funds have been availed.

This is perfectly understandable given the need to maintain very tight RTGS liquidity. As we have often said at CZI, the best stimulus that industry can have is a stable economy,” the CZI said.

The previous week, the government had claimed in its pre-budget strategy paper that funds had been disbursed, and some companies were benefiting.

“Besides causing a humanitarian crisis, the Covid-19 pandemic almost paralysed a number of our productive sectors through output and employment losses. Most affected sectors were tourism and manufacturing,” the paper said.

“Already, the government has committed significant resources under the ZW$18 stimulus package which is expected to restore production in the (agricultural) sector.”

Banks were treating State guarantees extended under the package with caution.

“The credit guarantee arrangement with the government is not offering enough comfort to banks to lend to the private sector. Government has to offer significant tax relief to businesses or set up a fund for drawdown by businesses,” the Zimbabwe National Chamber of Commerce (ZNCC) said in its own submission.

The absence of vital bailouts precipitated a near industrial calamity.

Even as the government claimed companies had started recovering, financial statements coming out of companies from November showed a grim picture.

So dire was the industrial crisis that one of the country’s biggest manufacturers, United Refineries Limited, briefly stopped production in November, while the CZI announced plans to retrench.

Under the ZW$18 billion package, the tourism sector had been promised ZW$500 million (about US$6 million) in state bailouts.

Nothing was realised.

Now, the sector is expected to contract by 98% after arrivals plummeted by 90% in the 10 months to October, according to the Zimbabwe Tourism Authority.

At least ZW$1 billion (about US$12 million) was wiped out of the tourism sector during the period.

In November, corporate data revealed that these figures were only a precursor to a far bigger crisis, unless new measures were arranged.

Millions of United States dollars had been burnt, and chief executive officers in big listed manufacturers such as BAT Zimbabwe, Nampak, Truworths and United Refineries Limited raised the red flag.

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