ZIMBABWE’S manufacturing industry requires about US$8 billion for working capital and equipment upgrades to arrest a downward spiral in capacity utilisation and collapse of firms due to viability challenges, industrial lobby group Confederation of Zimbabwe Industries has said.
CZI president Mr Charles Msipa told The Herald in an interview last Friday that Zimbabwe needs to mobilise significant amount of foreign direct investment to starve of the impact of the liquidity crisis in the economy. An estimated US$5 billion is required just to replace obsolete industrial equipment.
He said while the CZI 2013 manufacturing sector survey showed that industrial capacity declined from 44 percent in 2012 to 39 percent in 2013, the capital liquidity crunch tightened in the last half of 2013, further suppressing production potential and putting firms on the brink of collapse.
The net effect of the country’s more than decade long industrial fragility reflects in the US$3,9 billion trade deficit for the 11 months to November 2013 on the back of US$7,15 billion imports.
It was against the background of worsening financial strain on companies and the economy that CZI was leading a private sector mission to the European community later this month to try and mobilise FDI to ease the impact of liquidity crisis that is pushing up the cost of funding.
“The figure is a moving target because some companies managed to organise funding for working capital and capital upgrades. But I would suggest industry needs something in the region of US$8 billion for both short term and long term capital and equipment upgrades,” he said.
CZI said the galloping recovery growth averaging 7,1 percent per annum witnessed since dollarisation in 2009 to 2012 had moderated and the country requires FDI hence the private sector led efforts would first be targeted at the EU where most of the FDI in the sector comes from.
“Economic growth moderated in 2012 (peaking at 10,6 percent in 2011) and the country requires FDI. And a lot of FDI tends to be driven by the private sector in addition to government efforts,” Mr Msipa said.
Out of a total of the US$685,8 million project proposals approved by the Zimbabwe Investment Authority in 2013, US$158 million were for the manufacturing sector with US$34 million of the submissions coming from the UK and targeting mostly the manufacturing sector.
As such, CZI will lead a high powered delegation from industry, commerce and finance on a tour to the EU that will span major cities of London, Brussels, Paris and Berlin to meet union political officials and business representatives of individual, businesses, industry and commerce.
“We will try to explain and clear negative perceptions about Zimbabwe, the potential and prospects and what the opportunities for them (EU) are in this country,” the CZI president said.
He said the FDI mobilisation trip to the EU was only the first of many similar initiatives to follow as part of the private sector’s own contribution to the process initiated by Government to re-engage the international community, which Finance Minister Patrick Chinamasa said was critical.
The tour delegation will include CZI president and Schweppes Zimbabwe managing director Mr Msipa, Bankers Association of Zimbabwe president and Barclays Zimbabwe managing director Mr George Guvatanga and his BAZ deputy and Agribank Zimbabwe MD Joseph Malaba.
Masawara Plc chairman Shingi Mutasa, Chamber of Mines of Zimbabwe president Mr Alex Mhembere, CoMZ immediate past president Mr Winston Chitando and CZI past president Mr Kumbirai Katsande will also be part of the industry delegation to the EU from January 26 to 31.
Mr Msipa said the tour to the EU came on the back of positive vibes noted in earlier engagements with officials from the western block and the support from Government to undertake the mission motivated the trip as CZI lobbies to improve business and economic conditions.