via FDI evades domestic industry | The Herald December 17, 2013 by Golden Sibanda
THE Confederation of Zimbabwe Industries, the country’s biggest sector lobby group, says the manufacturing sector has not realised new inflows of foreign direct investment over the last three years. As such, CZI says Finance and Economic Development Minister Patrick Chinamasa’s 2014 National Budget should contain measures to create the confidence required to woo foreign investment and save industry from collapse. Minister Chinamasa will present the 2014 National Budget to an expectant nation on Thursday after skipping the traditional practice of presenting it in November. This was done to allow for extensive stakeholder consultations.
While a myriad of factors are at the centre of Zimbabwe’s economic crisis, lack of access to capital remains the single biggest problem to recovery efforts.
Although a number of alternatives to unlocking capital exist, most would take much longer compared to unlocking international lines of credit and foreign investment provided the right signals are sent to inspire investor confidence. The call for policy measures that could inspire investor confidence in the domestic economy is informed by the understanding that Treasury has little resource capacity to manoeuvre in order to rejuvenate the frail economy.
“We have not had significant inflows into the manufacturing sector in terms of foreign direct investment over the last three years,” said CZI president Mr Charles Msipa.
The CZI boss said while sectors such as the mining sector have realised some notable new FDI in recent years, there has only been fresh capital for replacement, refurbishment or rehabilitation of old equipment.
“We should actually be actively promoting FDI into the manufacturing sector for both existing new investors because without value addition and beneficiation you cannot export and create meaningful economic activity.”
Without fresh capital inflows, Zimbabwe’s manufacturing industry has struggled to produce at reasonable costs and to compete against imported products. Capacity utilisation plunged from 44,9 percent in 2012 to 39,9 percent. Even the fresh capital to replenish existing machinery and equipment has been limited and spread over time due to limited resources.
Meanwhile, low-priced South African and Asian imports have flooded the local market.
Imports have thus continued to drain the little available liquidity in the economy while increasing the trade deficit to unsustainable levels in what has also stalled efforts aimed at rebuilding local productive capacity.
And the CZI believes the fiscal policy would need to pronounce measures that enable access to affordable capital or lines of credit, as tight liquidity and deteriorating macro-economic conditions in 2013 have further dented business and consumer confidence in the domestic economy.
Mr Msipa said the National Budget should spell out measures to address bottlenecks in consistent power and water supply, the major constraining factors cited by industry in the CZI 2013 Manufacturing Survey.
Apart from addressing the issue of access to fresh capital or affordable lines of credit and resolving utilities infrastructure deficit, Mr Msipa said Minister Chinamasa should restore the Reserve Bank’s lender of last resort capacity.
“It is like an eco-system, when you do not have a healthy financial system; the rest of the economy suffers. The minister needs to capacitate the Reserve Bank Zimbabwe as the lender of last resort,” Mr Msipa said.
The CZI also implored Minister Chinamasa to expedite securitisation of the country’s minerals to use the resources for purposes of attracting lines of credit to improve liquidity in the economy.
Further, the industrial lobby group believes that privatisation of underperforming parastatals and State enterprises was critical to mobilising resources required to improve liquidity and economic activity.