BY FIDELITY MHLANGA GOVERNMENT has injected $240 million into the Industrial Development Corporation (IDC) to bolster its capacity to bail out broke state firms, Industry minister Sekai Nzenza has said, warning domestic companies to brace for stiffer regional competition. The IDC operates as an investment vehicle housing state interests in firms cutting across several economic sectors.
But sentiment’s towards re-engineering its operations have been growing with industry pointing out that it has failed to keep pace with emerging trends. Industrial chambers want the IDC to operate along the lines of the Industrial Development Corporation in South Africa, in order to give impetus to ongoing efforts to revive hundreds of firms that have collapsed due to economic mismanagement and corruption.
The South African IDC has been carrying out direct interventions in Zimbabwe, extending loans to vital institutions like Agribank. “The Industrial Development Corporation of Zimbabwe has been availed a revolving fund initially at $240 million. In the 2021 budget the IDC will get $1,9 billion to accelerate the programme of industrialisation,” Nzenza said while officiating at the launch of the Confederation of Zimbabwe Industries (CZI)’s 2020 Manufacturing Sector Survey.
The facility is part of a $1,9 billion re-industrialisation fund announced by Finance minister Mthuli Ncube in the 2021 national budget in December last year. However, it falls far short of the US$2 billion that industries estimated would be required to return to full-throttle production.
In a paper presented to government in October, the Zimbabwe National Chamber of Commerce emphasised how important it would be to rebuild the IDC, saying a lifeline of up to US$100 million had to be deployed to recapitalise it and boost its capacity to bailout companies.
The chamber said the IDC should be recapitalised to the same extent as the minimum capital threshold required for commercial banks. The big funding gap to be closed through IDC interventions was revealed by the Manufacturing Sector Survey, which said more than half of companies’ combined installed capacity was idle last year.
The manufacturing sector celebrated the leap in capacity utilisation to 47% in 2020, from 36,4% in 2019. But the numbers demonstrated how difficult it could be for the IDC to spearhead economic recovery with poor funding.
Nzenza told industrialists that government was exploring a range of options to reboot manufacturers after a difficult 2020 when many were affected by blanket lockdowns, which only allowed a few essential companies to open from March as the globe battled to combat Covid-19. Industries were already battling acute foreign currency, fuel and raw material shortages when the pandemic tore through.
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However, CZI’s report showed a dramatic comeback of the manufacturing sector last year when companies benefited from the closure of borders that restricted the flow of imported food.
“Work is also at advanced stages, in collaboration with sector players to develop the sugar strategy and the tobacco value chain strategy to strengthen these existing value chains.
“In the motor industry development, the recent initiative by government to curtail the importation of vehicles older than 10 years will support the resuscitation of local vehicle assemblers and components manufacturers,” Nzenza said.
“Government signed and ratified the AfCFTA (African Continental Free Trade Area) agreement which entered into force on 01 January 2021. “This has created an open market worth US$1,35 billion in Africa.
“The implication of the market liberalisation is an increased opportunity to access a bigger market. However, local players should also gear up and match increased competition from other countries.”
CZI said: “Capacity utilisation rose by 11 percentage points to 47% in 2020 from 36,4% in 2019 (due to) improved foreign currency availability, increased sales, re-tooling.”
It projected that capacity utilisation would rise to 61% this year, saying the economy would be helped by an aggressive vaccination programme that kicked off two weeks ago.
CZI said exports in processed foods increased by 18% last year, with revenues rising to US$115 million against US$98 million in 2019. The report also said top export products included sugar, which generated US$76 million, fruit juices, which brought in US$5,6 million, pastry products at US$3,7 million and tobacco products, which earned the country US$54 million.
