Industry and Commence Minister Welshman Ncube has conceded that various lines of credit sourced from foreign financial lenders have not been accessed by industries due to stringent conditions attached.
Ncube told NewsDay at the weekend that high interest rates coupled with tight lending conditions had resulted in local industries failing to access the funds.
He said contrary to views by industrial bodies that the government rushed to announce the lines of credit which are not accessible, “there was no pre-mature announcement on the securing lines of credit for local industries”.
“It is true that none of the lines of credit have been released and they remain as pledges. Modalities of payment and administration of the lines of credit are now added pre-conditions,” said Ncube.
“However, regrettably, instead of those pledges being given unconditionally almost all the countries insisted on pre-conditions.”
“Botswana insisted on signing of the Botswana Bilateral Investment Promotion Protection Agreement, which was done but they later said that was not enough. Parliament must ratify it but it takes a long time to be effected.”
A number of countries made undertakings to release funds to revive industries at the inception of the inclusive government in 2008 but almost all have attached conditions to the funds.
Industry bodies have voiced concern over the inaccessibility of lines of credit unveiled by government to ease challenges affecting the manufacturing sector.
Recently, Zimbabwe National Chamber of Commerce president Oswell Binha attributed the failure to access funds by companies to the premature announcement of facilities when there was still a lot of groundwork before funds could be disbursed to deserving beneficiaries.
In 2010, government unveiled a $70 million Zimbabwe Economic Trade Revival facility aimed at offering credit facilities to companies that required capital injection and new equipment.
A $70 million fund from Botswana was announced and last month, during his mid-term fiscal policy review, Finance minister Tendai Biti said the government introduced the Distressed and Marginalised Areas Fund of $40 million to help distressed companies in the country.
Average capacity utilisation in the manufacturing sector is ranging between 47-50% and it is expected to rise to 56% by year end.
Ncube said the delay in finalising the release of the funds would affect other ancillary programmes.
However, he said due to prohibitive interest rates charged by local banks, close to $900 million remains unutilised.
“If you go for those loans which attract close to 30% interest you should be in a business which is making margins higher than the interest rates.
“Therefore the money is available but expensive and the challenge is to come up with a formula to make the money cheap,” he said.
The minister said the high risk perception tag on Zimbabwe aided by continued threats by the government to grab foreign-owned firms was also contributing to the funds being expensive.
“If we continue making threats of taking over banks and mines it creates a climate of insecurity in the country and investors are scared away,” said Ncube.
Ncube said the timing of implementing policies such as the indigenisation drive has been very costly to the country as it has wiped off confidence that foreign investors had placed on Zimbabwe to the extent of putting on hold massive investment plans.