Economy requires US$2,5bn lifeline – The Zimbabwe Independent

Source: Economy requires US$2,5bn lifeline – The Zimbabwe Independent September 28, 2018

ZIMBABWE’S economic woes could worsen if industry fails to urgently secure fresh lines of credit amounting to US$2,5 billion within the next 60 to 90 days before a cumulative US$27 billion in three years to revitalise the country’s shrinking manufacturing sector, an industrialist has said.

BY NYASHA CHINGONO

Former Confederation of Zimbabwe Industries (CZI) president Busisa Moyo told the Zimbabwe Independent this week that corporates were already buckling under economic pressure, hence the need for an urgent bailout package.

“Economic challenges could deepen. Corporates are already under immense pressure,” Moyo said.

“The most critical and urgent solution is to secure credit lines and loans of US$1,5 billion within the next 30 to 45 days and the balance of lines of US$2,5 billion in the next 60 to 90 days.”

Moyo, who has overseen the resurgence of Bulawayo-based cooking oil manufacturer United Refineries, said the urgent rescue package will be spread across various raw materials, machinery, spares for critical infrastructure repairs, and clearing backlogs for creditor payments, interest and dividends currently on the Reserve Bank of Zimbabwe (RBZ) priority list.

According to a 2017 CZI Manufacturing Sector Survey, Zimbabwe is losing in excess of US$2 billion annually through the use of antiquated machinery.

Attempts by President Emmerson Mnangagwa government to secure a US$2 billion credit facility from China recently hit a snag after with the Asian giant cited failure by government to repay US$300 million arrears from previous loans. Moyo said government needs a credible economic revival plan to attract fresh funding.

Government is yet to craft a comprehensive economic plan, with Finance minister Mthuli Ncube saying his ministry would unveil a transitional economic stabilisation programme next month.

“We need a re-structured loan packaging underpinned by an economic revival plan,” he said.

Zimbabwe has been failing to attract fresh lines of credit because of the country’s high credit risk. Moyo also said attracting diaspora funding would be crucial for industrial resurgence.

As a remedy to the exports problem, Moyo proposed an increase of export incentives from 5-10% to 15-25% in light of the plummeting South African rand that has weakened by 30% since the beginning of the year.Industry is reeling from biting foreign currency shortages that have seen some manufacturers scaling down production or hiking prices to cushion themselves from rising production costs.