Govt to quit bailing out firms

via Govt to quit bailing out firms – DailyNews Live 13 DECEMBER 2014 by NDAKAZIVA MAJAKA

HARARE – Government will soon stop bailing out loss-making companies, but those “run efficiently and deserve to be rescued”, as it seeks to curb its expenditure, Finance minister Patrick Chinamasa said.

He said while the authorities “will only protect those companies that demonstrate that they deserve to be protected”, it is not sustainable to keep financially supporting the struggling entities at the expense of economic development.

“It cannot last forever. In other words those that demonstrate that they are bringing in new equipment, demonstrating managerial skills and demonstrating that they have the capacity…so please take note that we only want to protect efficiently run companies,” the Treasury chief told delegates at a Buy Zimbabwe event.

He said the current financial rescue arrangements — through Mike Bimha’s Industry and Commerce ministry — were short-term.

“This is an umbrella that we are giving you and it is only temporary,” he said.

This comes as most Zimbabwean firms are operating at way below capacity, around 36,3 percent according to the Confederation of Zimbabwe Industries, with government offering financial aid in the form of schemes like the Distressed Industries and Marginalised Areas Fund (Dimaf) and other incentives like the revision of duties on imports, among other protectionist measures.

Chinamasa acknowledged that some of the measures government adopted to protect the local industry were not sustainable in the wake of global competition, adding that they are only a window to allow the firms a chance to boost production.

Bimha has said before that government is not going to continue protecting the local industry as the players have to be competitive.

He criticised protectionism measures imposed by government, arguing that they were protecting inefficient firms.

In his 2015 budget, Chinamasa imposed more protectionist measures, including increasing import duty on finished products, to guard against continued flooding of imports.

He said while the support measures introduced by government have gradually yielded positive results, particularly on poultry, fruits, cooking oil, prepared foodstuffs, beverages and other products, such imported finished products as dairy, vegetables, soaps and refrigerators have remained on an upward trend, regardless of the potential for local production.

To encourage productivity and competitiveness of local products, Chinamasa scrapped duty on raw materials for a number of sectors such as dairy, rubber, clothing and textile.