New Zimbabwe.com

Bulawayo vital to economic recovery

BULAWAYO has traditionally been a key regional economic centre that contributed a significant amount of jobs, services and products to the Zimbabwean economy. The City has been the industrial hub of the country being home to industrial giants such as Dunlop, ZECO, Merlin, F. Issels, and many others.
These industrial giants employed tens of thousands of people and produced goods for the nation, regional and international markets. They contributed significantly to the manufacturing industry portion of the gross domestic product. According to The Chronicle newspaper, about 100 firms have closed down leaving approximately 20,000 workers unemployed. With each Festive Season shut-down, some companies fail to re-open.
A big challenge faced by the manufacturing sector is the economic sanctions regime that was put in place on Zimbabwe. The economic sanctions prevented Zimbabwean companies from accessing offshore lines of credit and attracting foreign investors and visitors. Other challenges included high debt levels carried by companies, mismanagement, out-of-date machinery that undermined the manufacturing processes, thus negatively affecting the companies’ competitiveness both in the regional and international markets.
The challenges faced by Bulawayo are of a serious nature and require concerted effort to resolve. In 2011, Government and Old Mutual introduced the Distressed Industries and Marginalised Areas Fund (Dimaf) totalling $40 million, which is being disbursed through CABS. This was a positive development, but it is not enough. According to the Minister of Industry, Mike Bimha, Bulawayo industries need about $8billion to resuscitate. The funds will go towards upgrade of capital equipment, operational capital and debt payments.
Several potential beneficiaries have indicated that there are stringent conditions around accessing this fund at application stage. Government should consider making an urgent intervention to make sure that the conditions of accessing this money are relaxed, while facilitating access to free or discounted professional services, such as financial and operational management for the beneficiary firms.
CABS should be encouraged to deal with the risk management factor at business operational level rather than at application process level. If the bank, in collaboration with other capacity building organisations can provide these professional services at business operational level, they will help companies stay afloat on shoe-string budgets and outdated machinery. It’s a tough task but something has to be done while a sustainable solution is being sought.Advertisement

The Permanent Secretary in the Ministry of Finance, Willard Manungo, was reported as saying the fund was being disbursed with about 28 companies expected to share $15 million, of which $2 million had already been given out. This funding is very small, but important for operational funds. It can make a difference between a company continuing to operate and shutting down.
However, the facility is not enough to service debt and buy new equipment that will make the companies competitive. Currently, companies use, in many cases, outdated machinery that frequently breaks down or has no capacity to produce mass goods at a faster pace and lower cost per unit. This leads to companies losing competitive advantage in the market.
Government intends to make Bulawayo a special economic zone by June this year, which it believes will attract foreign investment. Already, some foreign investors have shown interest in investing in Bulawayo. They will be given special incentives such as assurance of utilities, low interest rates, tax reliefs and export incentives. Government, however, should be wary that the special incentives don’t undermine the net economic benefit to the country.
The net economic benefit will include creation of jobs with decent salaries and benefits, ensure the predominant use of local vendors, establish infrastructure and advanced manufacturing industries, and implement the principles of indigenisation and economic empowerment.
The central government has vested interest to make sure that Bulawayo is economically viable. First, growing the national economy and, specifically, solving the Bulawayo economic problem is part of Zim-Asset, the Government’s socio-economic development plan. Second, the economic depression in Bulawayo shrinks the national economy thereby reducing government revenues and making it unable to fund many of its critical national obligations.
The effects of the economic sanctions will persist, but that cannot stop every investor in the world coming to Zimbabwe to invest. In fact, many investors from the Western countries that imposed economic sanctions are keen to invest in Zimbabwe.
As a matter of introspection, we need to reflect on ourselves to ensure that we are organized and ready to engage prospective investors. Bulawayo groups and different levels of Government need to come together and speak with one voice and share a similar vision in order to make a strong case for investing in the City.