Bimha says he will revive manufacturing during his tenure

Industry and Commerce Minister Mike Bimha says he will work to ensure that manufacturing, currently operating at less than 40 percent of capacity, is revived to become a major contributor to economic growth during his tenure in office.

He said industry required US$8 billion but the government had failed to provide US$100 million required to kickstart the revival of the industrial sector but the government was looking at ways to raise capital which will be administered by the Industrial Development Corporation.

Bimha was responding to a question from Mkoba legislator Amos Chibaya who wanted to know what the government was doing about a number of companies in Gweru that had closed down.

He said the government launched the Industrial Development Policy (IDP) in 2012 and it was now being aligned to the Zimbabwe Agenda for Sustainable Socio – Economic Transformation (ZimAsset), which envisages restoration of the manufacturing sector’s status as a key contributor to GDP.

The IDP had strategies to see, not only the growth of the industrial sector in the country, but also to revive industries that are in distress including those that have closed. The major strategies included among others:

• Industrial financing;
• Review of import tariffs;
• Cluster Development initiative;
• Provision of adequate infrastructure and utilities; and
• Engagement with the private sector.

Q & A:

RESUSCITATION OF COMPANIES IN GWERU 19. MR. CHIBAYA asked the Minister of Industry and Commerce to explain the Ministry’s strategy to resuscitate companies that have closed shop in Gweru, such as the Zimbabwe Alloys, David Whitehead, Zimcast, Radacasting, Kariba Batteries and Fort Concrete.

THE MINISTER OF INDUSTRY AND COMMERCE (MR. BIMHA): Thank you Madam Speaker. Let me answer this question first by giving you an overview of the state of affairs in the manufacturing sector and then quickly move on to what strategies the Ministry has put in place to resuscitate ailing/closed companies, not only in Gweru, but the nation as a whole.

As the hon. member might be aware, the economy is going through hard times and this has not spared the manufacturing sector, as evidenced by the continuous downward movement in the capacity utilisation figure from 44.9% in 2012 to 39.6% in 2013, despite the economy currently having an average inflation rate of 0.49% as at February, 2014.

Further to that, statistics from the Ministry of Labour and Social Services show that, although the number of people retrenched went down from 4 007 in 2012 to 2 376 by end of 2013, the number of companies downsizing continue to rise. For example, 165 companies retrenched their workers in 2013, a figure 18% higher than the 147 companies which retrenched in 2012. Mr. Speaker Sir, the reasons for retrenchments include viability challenges, restructuring, redundancy and closures among others.

Ministry’s Efforts and Strategies to Resuscitate Ailing/Closed Companies

As hon. members might be aware, Government in 2012 launched the Industrial Development Policy (IDP) which is now being aligned to the recently launched economic blue print, the Zimbabwe Agenda for Sustainable Socio – Economic Transformation (Zim Asset) 2013 – 2018, which envisages restoration of the manufacturing sector’s status as a key contributor to GDP, whilst seeking to improve production and export of goods and services, through value addition and beneficiation.

In the IDP document, there are strategies that have been put in place by the Government to see, not only the growth of the industrial sector in the country, but also to revive industries that are in distress including those that have closed. The major strategies include among others:

• Industrial financing;
• Review of import tariffs;
• Cluster Development initiative;
• Provision of adequate infrastructure and utilities; and
• Engagement with the private sector.

Mr. Speaker Sir, the foremost issue affecting industry is the issue of lack of affordable long-term finance for recapitalisation and working capital. Industry alone, now requires a minimum of USD8 billion, a figure that went up from USD2 billion (2009) for recapitalisation and working capital.

As a way to mitigate the shortage of finance for industrial development, the Government came up with two facilities to assist industry, namely, Zimbabwe Economic and Trade Revival Facility (ZETREF) and Distressed and Marginalised Areas Fund (DiMAF). Thetwo facilities had a total resource envelop of US$110 million, with ZETREF having US$70 million and DiMAF with US$40 million.

The two facilities contributed very little of industry requirement, (5% in 2009), thereby exerting limited impact on industrial revival. This prompted Government, through the IDP as well as the recently launched economic Blueprint, ZIM ASSET, to mandate the Industrial Development Corporation (IDC) of Zimbabwe as per its Constitution, to pursue its role of providing developmental finance to industry, with funding mobilised, in part, by Government (through the fiscus) utilisation of financial instruments (issuance of diaspora bonds) and direct negotiations for funding with countries and international funding institutions (through lines of credit).

As we are all aware, Treasury under the 2014 Budget did not provide for the requested amount of US$100 million as seed capital for IDC to be able to carry out this important task, the Ministry and the IDC are currently scouting for alternative sources of funding in view of the limited fiscal space.

Another strategy that is being implemented by Government to ensure resuscitation of industry is through tariff reviews. We are using the tariff regime primarily as an instrument of industrialisation, without, however, ignoring the revenue aspect.

Mr. Speaker Sir, the widening trade deficit is cause for concern, indicating as it does, a rapid and sustained de-industrialisation process which would become extremely difficult and financially unsustainable to reverse if left unattended.

Though Zimbabwe’s exports have increased since 2009 from US$2.2 billion to US$3.5 billion in 2013, imports have increased at a faster rate during the same period from US$3.5 billion to US$7.7 billion. The trade deficit has therefore, widened significantly from US$1.3 billion to US$4.2 billion in the same period.

Retail shelve space, which under normal conditions, should ordinarily be occupied with 70% of locally produced products, is instead occupied by imports, warranting enhanced interventions to avert this scenario. The growing import dependency is quite worrisome as it results in significant cash leakages, which in turn squeezes out any liquidity space intended for investment by the local industry.

Due to the porous nature of our borders (smuggling, use of fake import and export documents, among others), products are being imported without paying VAT and duties, whilst legitimate businesses have to pay both VAT and duty on the same products they import and on any spares or parts required to maintain their operations.

In this regard, the Ministry of Industry and Commerce has since cancelled all import and export licences issued before Friday, 10 March 2014 to give way for the issuance of new documents with added security features.

The Government will continue to put in place deliberate measures to manage the importation of goods which are already being produced locally through the tariff reviews and tariff rationalisation.

As a way to promote the growth of our industry through backward and forward linkages, Government is implementing the Cluster Development Initiative, a strategy based on proven benefits in terms of economies of scale, enhanced value addition, global competitiveness and development of comparative advantages.

The concept itself which is intended to capitalise on proximity to production, procurement and marketing synergies is facilitated through agglomeration of interlinked production activities comprising industries, their suppliers, critical supporting business activities, requisite infrastructure, institutions and the associated policy framework.

Furthermore and in line with ZIM ASSET, Government is also spearheading the Special Economic Zones (SEZs) concept, which has been identified as one of the major sources of funds for its (ZIM ASSET) programmes during the tenure of our office.

I am glad to report that the concept paper is now in place and a road map which will lead towards the operationalisation of the concept has also been developed. Rescusitation of industry cannot go alone without mentioning investment in essential infrastructure like energy, communications, transport, water and so on.

The sustained deterioration in the quality of infrastructure assets in Zimbabwe stemming from inadequate levels of public expenditures for routine and periodic maintenance of the networks especially in power, water, sanitation and transport (NRZ) is making implementation of both ZIM ASSET and the Industrial Development Policy difficult and I am aware that my colleagues in line Ministries are very much seized with these issues.

Gweru Companies

With respect to Kariba Batteries, the company went into voluntary liquidation in 2010 after having faced viability challenges. Government then intervened by advancing US$133 000.00 for raw materials which amount was then converted into 15% IDC equity. The company has since closed shop as a result of persistent viability problems. All its machinery has been auctioned and the building sold to the Rural Electrification Agency (REA).

Regarding ZIMCAST, the company went into forced liquidation also in 2010 and all its equipment has been auctioned.

Radacasting also ceased operations in 2010 after having faced serious viability challenges as a result of a fall in production from 130 tonnes to just 20 tonnes per month. The company was forced to move all its permanent employees to Bulawayo.

ZIM Alloys, which is operating at 5% capacity utilisation is currently looking for investment partners.

Fort Concrete is operating but under a different name altogether.

In response to the question of David Whitehead, I wish to make reference to my earlier response to Hon. Nduna, in which I gave detail on what measures Government is taking in order to resuscitate the company.

Conclusion

Let me conclude by informing the august House that my Ministry will continue to work with the private sector and other business organisations in making sure that the aspiration of the manufacturing entities are achieved during the tenure of my office.

Furthermore, Government will not remain a bystander, but will keep abreast with developments in various companies across the country and will continue encouraging ailing companies to scout for investment partners. I thank you.

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