Zimbabwe: ‘Wake Up to Reality’. .

via allAfrica.com: Zimbabwe: ‘Wake Up to Reality’. . . Some Firms Are Not Coming Back. 12 June 2014


International experts have said Zimbabwe needs to wake up to reality and come to the realisation that some of the industries suffering under economic challenges are not going to come back.

World Bank outgoing country economist Mrs Nadia Piffaretti said that the country has been experiencing accelerated de-industrialisation as now new firms are coming in while at the same time the old ones have gone past their lifetime.

She noted that de-industrialisation started 20 years ago and has accelerated in the past 10 years. “A World Bank report in 1986 raised concern on the archaic equipment being used by local industries at that time.”

Most of the industry in the country was built in the 1960s, during the UDI era as a sanctions busting measure. In most of the instances, industry was set up using second hand machines. After independence most companies failed to recapitalise only focusing on retooling and maintenance.

Mrs Piffaretti said de-industrialisation can only be corrected if a predictable economic environment is created considering that there is need for huge capital investment in the industry. “Firstly you need markets and technology. And this can be done through partnerships with foreign investors.”

In a study, commissioned by the Competitions and Tariffs Commission of Zimbabwe titled “Enhancing Zimbabwe’s Regime for Resolving Corporate Financial Distress”, Mr Daniel Fitzpatrick, a commercial law reform consultant seconded by USAID said companies in economic distress were unlikely to come back as they cannot succeed in the market place since competition produces a better product at lower cost.

He said economic distress exists regardless of a firm’s capital structure. “In this regard the company would still be unattractive even if it had no debts whatsoever.” This is because economic circumstances are now vastly different from the time when the company prospered.

As a result, its assets will fail to bring in sufficient revenue, relative to the costs of operating the firm and the alternative ways in which they could be used. “Eliminating creditors would not change the fundamental problem the firm faces.”

Mrs Piffaretti said Sable Chemicals was one such company which needed huge transformation in order to come back and compete with their products.

“The Sable Chemicals plant was installed in an era where there was excess electricity supply. It used to take up 20 percent of the nation’s power. But now where there is limited supply, it still requires the same amount of power.

Sable Chemicals is struggling to raise $750 million required for the establishment of a coal gasification plant at its Kwekwe factory to replace the current electrolysis system, which is expensive to run.

However, companies in financial distress are likely to survive and are less difficult to fix than those suffering from economic distress. “The challenge involves distinguishing between the two conditions especially when shareholders tend to see their problems as financial rather than economic,” said Mr Fitzpatrick.

Mr Fitzpatrick said generally Zimbabwe was a challenging place at the moment as the problems it was facing were truly substantial.

“Zimbabwe has a rigid currency regime which means there is no opportunity to devalue. Solutions in this case have to be approached from alternative methods.”

Mr Fitzpatrick also said that the banking sector is under threat if it continued ever greening (rolling over) loans as it piles more stress on banks’ balance sheets. “If that is not addressed then the banking system might be swamped.”

Officially in the sector 17 percent of loans are non-performing but this figure could be higher if the banks included restructured or “impaired” loans, for which banks don’t have to set aside heavy provisions in case of default.

Mrs Pifaretti said the only way out of the challenges facing industry was for Zimbabwe to lower its country risk. “The rates of returns are normal but country risk makes profits negative.”

She said Government needs to have a good policy environment which was predictable and consistent.

“An investor planning ahead cannot predict the country’s policies even for the next six months. Policy predictability would lower country risk.”

Mrs Pifaretti also said there was a lack of confidence on the respect of property rights even for domestic investors.

“New farmers cannot make any meaningful investments on the land. Land was given but not really given as they do not have title deeds.”

Finance Minister Patrick Chinamasa recently said Government is afraid of providing title deeds to farmers resettled under the fast-track land reform programme.

“We don’t trust those on it, we fear if title is provided the farmers are likely to sell the land to the former owners. We may end up with an accumulation of the asset in a few hands as was the case before the land reform,” said Minister Chinamasa.


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    Speaking to deaf ears in the government, most of then don’t even understand what is going on and they have no real interest. They just want to steal what they can. The country is broke so now they go about with cap in hand begging and that is just so they will have more to take.

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    John Thomas 8 years ago

    This thinking is way too advanced for those who rule here

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    Roving Ambassador 8 years ago

    ZANU== looting. Everything else don’t matter.

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    Another distillation of facts from the scenario-to deaf ears.Oh my God!!

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    I think that for Zimbabwe to even start to grow we need to get in the queue. But to get in the queue we have to get rid of those that put us there in the first place.When that is done we have to start slowly with the things that no one else has that we can offer to the outside world. We have the best tourism sites in the world. Who will come whilst these people rule. Then we have to say to investors come we give you so many years tax breaks, assistance, a willing labor force. We need you to employ our people. Then we need to look at all the former commercial farms and who is handling them. Those that stole get rid of. Put the professionals back in with an agreement that they will thrive to feed the people. Protect them.The extra land which is plentiful can be used for those that are small scale. In other words we need a rebirth. This time with leaders that will listen to the people.

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    Mlimo 8 years ago

    Lets face the reality. When the struggle commenced all vets were promised farms, cars, schools and health, access to first world benefits. Some ven thought they would get white wives. most joined the struggle seeing as an easy way to riches, never really having worked hard saved or tried to make a go at life in the real world. The struggle only accentuated this misplaced wishful thinking where the boys were fed for free in the villages, showing a gun was ticket to a good life. The locals often had to offer their daughters and hard earned cattle up for free. Then of course the rural shops were open to looting. They after in the majority belonged to the whites. So stealing what one wanted was a good way to accumulate previously unreachable riches. This mind set was now ingrained into the generation that took over. The ability to do a hard days work is foreign to most zanupf. the riches of zimbabwe are being looted like theyw ere in the old days, the nation of people who do work are being held to ransom just like the way it was by showing a gun and masses are still used to provide these so called louts and thugs a living.
    The reality is that to be wealthy one has to work hard, every day, every till 70. and even then that doesnt guarantee riches.
    Unfortunetly the mindset in zimbabwe is based on a comepletly wrong perception and the government is still a band of terrorists taking what they want without recourse. Only zimbabweans can stop that. Zimbabwe will need the help of the despised west to progress without that it it will always remain a black hole. The west for its half only wants to see the end of zanupf nothing less will suffice.

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      Mlimo, you have hit the nail right on the head on most issues. Nevertheless, this is not a mindset of all Zimbabweans. Truth is, this the ZPF mindset. Otherwise there are many Zimbos who truly want to better their lives using fair means but will simply not be allowed by the current system, wherein the most important qualification is a ZPF card and ability to coin the most intimidating slogans, reminiscent of the ‘pungwe’ of the now infamous ‘liberation’ struggle.

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    Heighho 8 years ago

    PC afraid to grant title in case new farmers sell land to previous owners – that is white zimbabweans. !! This is marginalization of an ethnic minority for political purposes. GENOCIDE. Do not take WZ tax if you do not extend the protection of the law to this group of citizens PC. Read the history, you buffoon. You most likely would not have been dropped from the womb of your mother and most certainly would not have obtained a degree in law if the horrid settlers had not colonised this country. Can you not see this? British imperialism gave a lot more than it got – like great institutions built on the rule of law. Why do so many Africans aspire to move to UK, Antipodes, Canada , USA if Brit imperialism so bad?

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    Justice 8 years ago

    Afraid to grant title – what BS, they can’t until at least improvements have been paid for – and that ain’t about to happen. Besides Disgrace and Mugarbage don’t need a legal title they just take what they want – oh how sweet the day when they are chased off, preferably on foot with Disgrace hopping along in her 5 inch Gucci’s down the dusty road!

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    The weevils are almost finished in what ever they can eat, now they will turn on each other.

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    ……“Firstly you need markets and technology. And this can be done through partnerships with foreign investors.”…….

    Who, in their right minds, are going to invest in Bob’s Zim?
    Even the Chinese are looking at us askance

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    Chinamasa wake up. You and ZPF. You have done what you set out to do: destroy Zimbabwe and take revenge on the white population. When a man sets out on the road of revenge he must dig two graves. So what if a black zimbo gets title deed and sells land to a white Zimbo brother. So what. Your bitterness has destroyed this nation and is eating you all up like cancer. You gave the land to some who did not want to farm and some who could not farm. Your whole heart motive was destructive. It is time to turn back and do the right thing.You have cut off your noses and brought spite on the whole face of Zimbabwe. God’s judgment is coming unless you repent. The whole of ZPF needs to repent along with a largely errant church and all of us. No repentance no restoration