HARARE - Zimbabwe on Friday received a $4,1 million loan from the European Union (EU) aimed at reviving the private sector.
The bail-out comes at a time the sector — which had recovered from a decade-long recession following the formation of a coalition government in 2009 — is now showing signs of strain with capacity utilisation hitting new lows.
According to the Confederation of Zimbabwe Industries (CZI)’s 2013 Manufacturing Sector Survey, capacity utilisation declined by 5,3 percent from 44,9 percent in 2012 to 39,6 percent in 2013.
Experts say most companies are failing to replace antiquated machinery, relegating their competitiveness.
Industry minister, Mike Bimha, said the loan would help recapitalise the local manufacturing sector amid concerns that some firms could be facing imminent closure.
“This programme is coming at an opportune moment for the country as it is aimed at capacitating the private sector to meaningfully contribute towards the current efforts by government to revive the economy and also strengthen the capacity of all economic players in the implementation of the interim Economic partnership Agreement (EPA) with the EU”, he said.
Bimha noted that the $4,1 million funding will run for two and half years starting this February and would be administered by the International Trade Centre.
“I have been informed that besides the programme we are launching today, we have another $7,1 million in the pipeline made up of $1,3 million to support the implementation of the EPA and another $5,7 million from the regional fund to support regional integration and development,” he said.
Aldo Dell’ Ariccia, EU’s ambassador to Zimbabwe, said the trading bloc was keen on expanding economic relations but policy discord on the part of the southern African nation was affecting investors.
“There is lack of clarity of policies. There must be transparency and accountability on these policies. You tend to hear contradictory sentiments from one official to another especially on indigenisation”, Dell’ Ariccia said.
He said Zimbabwe needed to turn its blueprint, Zim Asset, into a strategic document which will help investors come in.
“The document is silent on where the funding for all those projects will come from. There is need to clarify some issues if you want to attract investors.”
The time span given by government for the implementation of Zim Asset is also short as there was critical need of foreign direct investment, he said.
The government needs around $27 billion to implement the economic blueprint, a huge amount by local standards considering that its budget has $4 billion annually in the last three years.
Economists, industrialist and labour experts have warned that 2014 will be a tumultuous year for the country’s industries with more companies sliding into liquidation, resulting in job losses.
Zimbabwe’s industry — still suffering from the hangover of a decade-long economic crisis — has been bleeding due to cheap Chinese imports since 2009 when government liberalised the economy, according to economists.
Nearly 100 companies have closed down in the country’s second capital city Bulawayo since 2010, putting out of work an estimated 20 000 workers, with the remaining companies scaling down their operations or relocating to Harare.