Boost for Zimbabwe industry

Government is considering providing credit guarantees for offshore borrowings by private firms seeking funding amid reports local industries require at least $2 billion to retool.

Industry and Commerce Minister Mangaliso Ndlovu told The Sunday Mail Business in an interview that while it was ordinarily not Government's role to provide such guarantees, the matter is under serious discussion.

In recent years, the Government has been mainly providing guarantees to State-owned entities.

"It is an issue under discussion at the moment and I can't say much," said the minister.

"But it is largely motivated by the desire to reboot industry. In the event that it materialises, it should be in consistency with our developmental goals and industrialisation drive."

Zimbabwe's manufacturing, mining and construction sectors, among others, are expected to drive this year's growth and has already shown a solid performance since January.

The growth has been mainly driven by increased consumer demand and import restriction measures put in place by the Government to protect local companies.

However, the greatest setback has been the foreign currency shortages. This has seen many companies struggling to secure raw materials to operate at optimal levels.

"As Government, we realise the need to properly equip our industry so that it plays the role it ought to play in our economy," said Minister Ndlovu.

"One of the issues that we have picked up is that most of the equipment that we are using is obsolete. In fact to say obsolete is an understatement, archaic could be close to it.

"We have to focus on retooling. Government seeks to identify private players to come and facilitate this process. We will emphasise more on coming up with policies that are friendly to business, policies that will facilitate growth."

The Confederation of Zimbabwe Industries president, Mr Sifelani Jabangwe said the arrangement will boost business as financiers are already asking for sovereign guarantees.

"A number of companies are having problems accessing capital as funders are requesting guarantees from the Government," Mr Jabangwe told The Sunday Mail Business.

"Companies can look for suppliers who can provide funding and Government backs that facility. There are foreign players who are ready to support local companies."

Mr Langton Mabhanga from The National Business Council of Zimbabwe said the arrangement will enhance industrialisation, development and productivity.

"It is the shortest possible way to jump-start the economy, Government is looking for the cheapest possible way to kick-start industrial growth," he said.

"The instigation of sovereign guarantees will be a driver of investment."

However, he highlighted that the guarantees will increase Government borrowings.

Zimbabwe is in arrears of about $1,8 billion to the World Bank and the Africa Development Bank. The country is already working on a plan, with the help of the International Monetary Fund and the British government, to clear its obligation.

Clearing the arrears will make Zimbabwe eligible for new funding, cut in 1999 after Harare defaulted.

Apart from making Zimbabwe eligible for new funding, paying off arrears will improve the country's sovereign risk.

Zimbabwe's industrialists will next week lay out proposals aimed at reshaping the industry to create an economy that is open to new industries in line with Government's reform agenda and vision to transform the nation into a middle income State by 2030.

Currency and fiscal reforms as well as implementation models — all critical ingredients to reboot Zimbabwe's economy — are among major issues that will come under discussions at CZI's two-day congress to be held in Bulawayo.