R9bn for local industry

05 Apr, 2019 - 00:04 0 Views
R9bn for local industry Minister Ncube

eBusiness Weekly

Africa Moyo
Government is seeking R9 billion (about US$635,8 million) loan or bond from the South African private sector, in a bid to capacitate the local industry, which is struggling to ramp up production due to a range of issues particularly a lack of finance. Once the negotiations are concluded positively, the local manufacturing sector, especially firms with a bias towards the export market, would obtain the funds to procure raw materials and equipment.

It is a revolving facility that is being crafted.

Finance and Economic Development Minister Professor Mthuli Ncube, was recently in South Africa, where he met investors at First Rand to mobilise support for the syndicated

loan or bond earmarked for the local private sector. This week, Prof Ncube told Business Weekly that they are seeking about R9 billion, which should go a long way in helping manufacturers boost their operations.

“Frankly, we are looking at about R9 billion. That is the figure we are playing with because we think that is what the industry needs as blood transfusion,” said Prof Ncube.

“So, the structure is like this; what we are negotiating is with the South African private sector. The monies are coming from the banks and other investors.

“And the idea is that once we source those funds, we then request for a guarantee structure from the South African government so as to improve the credit standing around the facility and then the Zimbabwe Government will also offer a counter guarantee.”

Prof Ncube said it was critical that the private sector was capacitated so that exports are expedited and help the country generate the much needed foreign currency.

Zimbabwe is in the grip of foreign currency shortages, which are now impacting on the availability of key imported products such as fuel.

Wheat growing is currently low across the country and imports of the product to ensure bread availability have also spiked, gobbling about US$20 million per month.

Similarly, crude oil imports to ensure a steady supply of cooking oil have gathered pace, while electricity imports have previously been chewing up to US$20 million per month.

This has put pressure on Treasury as it battles to balance the distribution of the little available foreign currency to all the critical sectors. Since assuming office, Prof Ncube has deliberately called on companies to export more to increase foreign currency generation and reduce pressure on the Reserve Bank of Zimbabwe (RBZ).

Companies have been queuing at RBZ to have their foreign payments for raw materials and equipment processed, a move which resulted in a number of firms going for over a year without such approvals, given the scarcity of forex.

Facility to remain in SA
Prof Ncube said the R9 billion financing facility is sealed, the money would not come to Zimbabwe, but shall be accessible from South Africa by local companies.

“My intention is that the money should really not come to Zimbabwe, but for our corporates to then access the facility in rand for raw materials and for equipment. But the first preference is those (companies) who are exporters to South Africa in the first place. This is key because if they are exporters, then we can set up an escrow account for each of them so as they export (and earn) their rand, we hold back on some of their earnings and we use that to service the loans,” said Prof Ncube.

He said an “update” regards negotiations over the facility would be given in the near future “because really at every stage, one has to ensure that it is do-able and the South African private sector is happy to render those kind of monies. So those are things to keep fine-tuning”, said Prof Ncube.

Another BWP600m facility being crafted
The discussions for the R9 billion facility come at a time when the Ministry of Industry and Commerce is also negotiating a BWP600 million facility with Botswana, aimed at capacitating the local manufacturing sector.

Industry and Commerce Minister Nqobizitha Mangaliso Ndlovu told Business Weekly in an earlier interview during the inaugural Zimbabwe-Botswana Bi-National Commission (BNC) in February that they were “still negotiating an economic co-operation with Botswana”. Minister Ndlovu indicated that the talks had not reached a stage where a Memorandum of Understanding would be signed, but said “we are working on it; there is good progress”.

“. . . we expect also to unlock some funding for our local industrial retooling programme. It’s (the facility) in the range of BWP600 million.” Zimbabwe’s relations with its neighbours are at an all-time high and is hoping to take advantage of that to stimulate economic recovery.

Govt’s own interventions
Government is not sitting idle hoping that foreign assistance will revive the economy in general, and industries in particular.

This has resulted in the allocation of RTGS$30 million to the Industrial Development Corporation of Zimbabwe (IDCZ) for extension to distressed firms.

On Monday while meeting with business member organisations (BMOs) and IDCZ officials in Harare, Minister Ndlovu said it has become imperative that Government actively pursues the revival of companies that were choked by sanctions imposed by the United States and the European Union.

Minister Ndlovu said they have made significant strides in efforts to help bring back to full operation, companies that have over the last two decades succumbed to the “ruinous illegal sanctions imposed on the people of Zimbabwe”.

“For some (companies), their closure has left a vacuum that we currently fill with imports and this is unsustainable. Jobs have been lost in the process and we need to regain them.  In this regard, the IDCZ is realigning its mandate to play its DFI (Development Finance Institution) role, which will see it play a leading role in the programme of resuscitating distressed companies.

“The Government allocated RTGS$30 million to IDCZ specifically for this purpose but mobilisation will be extended to the private sector so that we crowd fund and reach out to more companies in need,” said Minister Ndlovu.

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