Bulawayo still reeling from illegal sanctions

Source: Bulawayo still reeling from illegal sanctions | The Herald

Bulawayo still reeling from illegal sanctions

Mashudu Netsianda Bulawayo Bureau

THE tale of the demise of Bulawayo’s industries is a story which cannot be separated from the illegal sanctions imposed by Western countries on Zimbabwe.

Once considered the country’s industrial hub with flourishing factories, Bulawayo is today a pale shadow of its former glory.

At the turn of the millennium, the manufacturing sector in the city suffered the most due to economic sanctions, which stifled its ability to effectively operate. 

Productivity nose-dived as companies failed to retool due to their inability to access cheap financing. 

The country’s Land Reform Programme implemented in 2000 triggered the imposition of economic sanctions against Zimbabwe, mainly in the form of the so-called Zimbabwe Democracy and Economic Recovery Act (ZIDERA) in America. 

Our Bulawayo Bureau yesterday visited selected industries in the city, which are still bearing the brunt of the embargo.

What used to be the city’s bustling industrial area today resembles a ghost town with a few firms such as United Refineries, Archer Clothing, Datlabs and Arenel operating at decent capacity utilisation levels while a majority have either closed or are operating below capacity.

Most of the buildings have obsolete and decaying equipment while some have completely closed shop. 

Big engineering firms synonymous with Bulawayo’s industrial heartland, which include what was once the giant iron and steel engineering firm F Issels and Sons, General Belting, Radiator and Tinning, and Hubert Davies are now just factory shells whose machinery is now coated in red dust and rust.

Our Bulawayo Bureau also observed that some of the buildings such as Merlin Towels, which was once a textile giant, has peeling paint on the walls due to years of decay.

The now defunct giant textile firm, National Blankets Limited is a shadow of its former self. SMEs are renting out space. 

Goldstar Sugar Refineries along Khami Road is also closed and the building has also gathered dust with broken window panes.

Industrialists and social commentators attributed the collapse of the city’s industries to the illegal sanctions.

Zimbabwe National Chamber of Commerce (ZNCC) Matabeleland regional chairperson, Mr Golden Muhoni said Bulawayo companies were feeling the pinch of sanctions.

“Sanctions and the collapse of industries in Bulawayo are interconnected to each other. We are a global economy where financiers and recipients of the funds work in harmony. When you are under sanctions what it means is that you are no longer able to access cheap funding from global institutions such as World Bank and IMF,” he said.

“Even the funder who might be willing to fund will not be able to do so because the country risk is very high. Ultimately, it affects those industries which want to replenish.”

Mr Muhoni said at independence, the country’s industries were connected to the United States and Europe in terms of accessing spare parts and machinery.

“Due to sanctions, it means companies are no longer able to access the equipment including the funds because those willing to fund risk are being penalised and, in that sense, industry feels the impact,” he said.

Mr Muhoni said sanctions also affected a lot of industries which used to rely on European markets. 

“Some of our products have been going to foreign markets via the backdoor and an example is our diamonds which we were not able to sell on the open market because of sanctions. These are some of the negative effects of sanctions because if you  are not able to go to the open market, we will do so via third parties,” he said.

“There are quite a number of companies which folded up while others downscaled because of sanctions. If you look at National Blankets, some of the equipment was coming from Germany and for that equipment to be replaced or serviced, it becomes difficult to access funding because of sanctions.”

Mr Muhoni said due to interdependence between companies, some of the industries were indirectly affected by sanctions resulting in people losing jobs and sources of income due to reduced production capacity.

Economic analyst, Mr Reginald Shoko said the cost of doing business in Zimbabwe is now very high because of sanctions.

“Sanctions are making transacting in Zimbabwe very expensive because people have to reroute the money since there won’t be any corresponding banks when doing international transactions. For example, Standard Chartered Bank can no longer transact with local banks as a foreign transactional bank hence people are forced to look for alternative banks,” he said. 

“The cost of doing business in Zimbabwe is now very high because of sanctions. We have quite a number of Bulawayo companies whose monies are still held in foreign lands and they are negotiating as we speak.” 

Mr Shoko said any local company that is exporting to the EU is likely to face serious challenges in terms of receiving payments as their money would be held overseas waiting to be cleared by American authorities.

“When you are making foreign payments, you need a corresponding bank and most corresponding banks will tell you that since Zimbabwe is under sanctions, they can’t assist. It, therefore, takes long to make a payment and it is also not easy to get a loan when your country is under sanctions because it is tagged as high-risk destination.”

Mr Shoko said companies such as Dunlop and the National Railways of Zimbabwe have been affected by sanctions as they can’t buy raw materials for manufacturing tyres and spares parts for locomotives in Europe.

“Zimbabwean’s economy largely relied on Britain and other EU countries for spares. Most of the machinery in Bulawayo came from Germany and Europe and because of sanctions they are not getting machinery anymore, and that kills efficiency.

Another economist who preferred to remain anonymous said: “ZIDERA is more of a political thing which is now affecting an ordinary man and woman on the streets. From a banking perspective, if you want to import raw materials you won’t be able to do so because of sanctions. 

“You can’t get lines of credit and no one will be able to lend to these banks so that they in turn lend the companies. Even someone who does not understand how these sanctions came about gets affected.” 

The Southern African Development Community (Sadc) has maintained that the economic sanctions imposed on Zimbabwe are hurting the entire southern African region and hence the economic bloc on October 25, 2019, embarked on a campaign to speak with one voice against sanctions on Zimbabwe.

October 25 has been set aside as a solidarity day against illegal sanctions imposed on Zimbabwe and all SADC countries have agreed to conduct various activities in their respective countries on that day to resoundingly call for the immediate removal of the sanctions. 

A study by the university of Zimbabwe says the country lost about US$4,8 billion worth of revenue in the manufacturing sector in 2010 and US$2,1 billion in 2015 due to Western sanctions.

Dr Nyasha Kaseke, a senior lecturer at the University of Zimbabwe’s Business Studies department, who unveiled the findings at a meeting held in Harare in September 2018, said manufacturing — a key sector of the economy — was the sector that had been worst hit by sanctions.

COMMENTS

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    Mukanya 2 weeks ago

    “Manufacturing — a key sector of the economy — was the sector that had been worst hit by sanctions.”

    That’s absolutely hogwash, the collapse of Zimbabwe is due to gangster policies and management/administration styles pursued by ZANUPF for the past 41 years….!