Industry in fresh push for bailout

Source: Industry in fresh push for bailout – NewsDay Zimbabwe


ZIMBABWE’S manufacturing sector has escalated its push for State-assisted bailout packages to stem a blazing crisis precipitated by the COVID–19 pandemic, a deteriorating foreign currency crisis and general economic mismanagement.

On Thursday, the country’s biggest industrial lobby, the Confederation of Zimbabwe Industries (CZI) warned that in the absence of such injections, current turbulences would be difficult to circumvent.

In a paper titled “2022 Budget Statement Issues from Industry”, which was released as Zimbabwe battled to forestall a runaway parallel market exchange rate, which this week sparked confrontation between government and business, the CZI said such packages would have to be carefully guarded to avoid plunder.

The paper was submitted to Industry and Commerce minister Sekai Nzenza and her Finance counterpart Mthuli Ncube.

De-industrialisation intensified following the COVID–19 outbreak last year.

But the crisis deteriorated further after the foreign currency auction system ran into problems, starving industries of crucial forex for raw material and equipment imports.

Under the hyped National Development Strategy One (NDS1), the Finance ministry said priority was towards rebuilding value chains that were disrupted as the pandemic hit economies.

“Although the NDS1 has identified priority value chains, there are deep and imbedded challenges, which require stimulation to kick-start,” CZI said.

“The 2022 budget should begin to commit resources to industrialisation, specifically by coming up with a resource envelope which value chain players can tap into to pursue industrialisation. Mechanisms can be put in place to ensure that the resources are accessible only for ring-fenced uses, with limited possibilities of diversion,” CZI said.

The lobby group’s president, Kurai Matsheza warned of the dangers posed by Zimbabwe’s power crisis.

Government’s ability to raise re-industrialisation lifelines was thrown into question last year when it undertook to provide but failed to deliver $18 billion for companies thrown off balance by COVID–19.

The package was earmarked for providing working capital, recapitalisation, interventions to small-scale enterprises and other requirements.

Underfire industries, battling subdued demand in the aftermath of extensive job losses, have raised about US$45 million through alternative sources.

In addition, out of the US$1,7 billion channelled to industries through the foreign currency auction system, about US$23 million was deployed to recapitalisation.

The CZI said more effort should be devoted towards promoting exports in the upcoming national budget.

“Export receipts are now playing a central role in the economy,” the lobby group said.

“Efforts should be more on export promotion by minimising taxation of exports. The current export tax regime needs to be reviewed with a view to eliminating and reducing export taxes. For example, exporters pay up to 45% cumulatively in taxes.

“While the tax incentives that have been introduced are welcome, the export surrender requirements need to be reviewed downwards, especially in the face of exchange rate distortions, which are threatening the viability of exporting manufacturing firms.

“The country and businesses are facing challenges in getting access to international credit lines due to a huge external debt. It is critical for the 2022 National Budget to send a clear message on how the country will start to re-engage on debt overhang resolution so that economic progress will not be hamstring,” the CZI added.