via Govt fails to fund Dimaf – DailyNews Live 4 July 2014 by Kudzai Chawafambira
HARARE – Government has failed to provide the $20 million it pledged towards the Distressed and Marginalised Areas Fund (Dimaf), compelling hard-pressed industries to rely on private sector funding.
Under the $40 million Fund, established in 2011, government was supposed to provide $20 million while Old Mutual’s CABS would avail the balance.
On Wednesday, Industry minister Mike Bimha told Parliament that out of the $40 million pledged under the government and private sector partnership, to date only CABS had provided funds amounting to $27 million, $7 million more than their offer.
Dimaf is a revolving facility created to provide financial bail-out to struggling companies outside Harare, particularly those in Bulawayo — Zimbabwe’s second largest city.
“Government was supposed to put $20 million. Old Mutual honoured its obligation and put in the $20 million.
“Government, unfortunately, did not honour its obligation up to date. So, only $20 million was available and it was a drop in the ocean, even $40 million for that matter,” Bimha said, adding that “it was a bad beginning”.
He said because of the inclusive nature of the then government, there were disagreements as to who was supposed to administer Dimaf, but eventually it was agreed that CABS take up the task.
Bimha, however, noted that conditions set by the building society were too tough to meet as ailing companies were asked to present, among other requirements, audited accounts for five years and collateral.
“These are ailing companies, how then do you prove that you are going to pay when you are already dead?” he queried.
He said the CABS funds were disbursed to 48 companies, 26 of which were in Bulawayo with the rest shared among other provinces.
Going forward, Bimha said they have engaged the Finance ministry to consider numerous strategies to address the issue of funding distressed industries.
He said CABS had since agreed to relax regulations for struggling companies to improve access to Dimaf.
“We have engaged Old Mutual to consider relaxing some of the terms of the current conditions and they have agreed. So that is the starting point,” he said.
He added that government was also considering strategies to enlarge the fund by approaching other financial institutions within and outside the country.
“We are also discussing with Comesa (Common Market for Eastern and Southern Africa) who would want to put up a regional facility with the participation of regional players such as PTA (Bank) and others, with a view of assisting companies,” Bimha said.
He said while he was attending the African Caribbean Pacific-European Union meeting in Nairobi, Kenya last week, he was informed that the European Union Investment Bank (EIB) was now prepared to consider funding the private sector in the country and would send a team to make an assessment following a visit two weeks ago.
Local industry requires an estimated $2 billion for retooling and working capital to boost its competitiveness.
Most Zimbabwean firms are struggling to survive due to antiquated machinery, erratic power supplies, high finance costs and stiff competition from cheaper imports.