THE African Development Bank (AfDB) will be injecting US$53 million over the next 24 months to bolster the recovery of Zimbabwe’s industries, businessdigest can reveal.
AfDB’s Zimbabwe strategy, disclosed to this publication this week, comes a month after the International Monetary Fund (IMF) injected significant liquidity into the economy to stem a decades-long meltdown.
The lender’s country manager, Moono Mupotola, who spoke exclusively to businessdigest said the US$53 million was part of a recently approved broad plan touching several facets of the economy, including rebuilding the private sector, as well as beefing up capacities in decaying social infrastructure.
The package will bring current AfDB funded private sector projects to about US$100 million.
“The bank is currently processing projects to the value of US$53 million over the next two years with 80% of the funds meant to grow the economy through support to the private sector,” said Mutopola, a Zambian national who arrived in Zimbabwe in December last year.
“The bank’s portfolio in Zimbabwe has a total value of US$235 million and of this US$51,4 million supports private sector initiatives, including in the financial sector. We are currently working on raising funds for the continuation of ZimFund. As you may be aware, the US$145 million ZimFund programme, which has been running since 2010 is coming to an end in December 2021.”
Funding Zimbabwe’s private sector will be key to reviving the manufacturing sector.
In May, the Confederation of Zimbabwe Industries (CZI) said the sector was struggling to raise US$2 billion in fresh capital to drive production back to pre-crisis levels, as executives warned the government to address factors that have repelled investment.
A CZI poll of 400 companies showed significant industrial recovery in the aftermath of a difficult 2020 when diminishing spending power and foreign currency shortages haunted firms.
The survey revealed that while 86% of Zimbabwean executives were bullish about the 2021 outlook, drawbacks stemming out of capital shortages were a major factor.
The CZI said companies injected a combined US$25 million during the first quarter.
An additional US$325 million was raised through the Reserve Bank of Zimbabwe’s foreign currency auction system to bolster private sector operations, according to central bank data.
“New investments by firms usually indicate a bullish outlook by business,” the CZI said. “For Q1 (first quarter), respondents undertook investments totalling over US$24,5 million into the local industry. This was driven by anticipation of a continued positive economic outlook.
“As such, capital was directed towards retooling and modernising production processes to become more efficient and meet expected increase in demand as the economy grows. However, investment (both domestic and foreign) remains low in the local industry, which needs more than US$2 billion to retool.”
Key constraints to investment include challenges for foreign investors to remit dividends through formal banking channels, liquidity constraints, exchange control regulations that pose exchange risks, a heavy taxation burden and a complex business environment.
The US$2 billion figure first came out in a government commissioned report by the University of Zimbabwe about four years ago. The paper looked at the impact of the global embargo against Zimbabwe, which was estimated by the ruling Zanu PF to have cost the country US$42 billion between 2002 and 2013.
Last month, the IMF released US$961 million in Special Drawing Rights for Zimbabwe, part of US$650 billion injected into the global economy to stimulate demand, which had tapered off after blanket hard lockdowns rolled out to contain Covid–19 crippled economies.
Finance minister Mthuli Ncube said part of the windfall will be channelled into setting up revolving facilities to boost industrial recovery.
In this week’s interview, Mupotola said generally, Zimbabwe was benefitting from projects that include investment into revamping the water and sanitation system, as well as improving power supply.