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Golden Sibanda Senior Business Reporter
THE single biggest challenge to efforts aimed at setting Zimbabwe back on a sustainable path to economic recovery and growth after a decade of recession to 2008 is lack of access to affordable medium and long term funding. Zimbabwe faces a peculiar situation where it has to deal with a multiplicity of problems including power deficit, external competition, high cost of labour, utilities and raw material scarcity as it battles to bring the economy back on the rails.

Economic analysts believe that no matter how brilliant Government policies will be, without access to reasonably priced long term finance economic will not succeed.

Billions of dollars are required to rehabilitate and put new infrastructure from water and sanitation to roads, airports, railway lines, power stations, electricity transmission lines to industrial machinery and equipment to enhance productivity.

Other productive sectors of the economy namely agriculture, mining and tourism equally require significant funding to escape the quagmire of the decade of recession.

While the economic problems are varied and distinctly separable, the bottom line is that their size and magnitude has been fermented by lack of access to affordable medium to long term funding especially after dollarisation of the economy.

The scenario has constrained the country’s capacity to regenerate its productive capacity.
One of the questions that have popped up is whether it is not possible to vigorously pursue innovative ways to enhance domestic liquidity mobilization to support productivity with as much as US$3 billion thought to be speculating informally.

This is not however to underestimate the amount of money required to revive the economy.
Infrastructure alone, according to the African Development Bank needs US$14 billion, agriculture US$2 billion annually, industry US$2,5 billion for retooling and mining requiring US$5 billion to US$7 billion over a 7 year period.

It should be noted that building confidence in the country’s financial system will be key to efforts Government will undertake to mobilise domestic resources considering the critical intermediary role of banks in oiling economic activity.

Apart from exports the other source of liquidity would be foreign direct investment. But due to Zimbabwe’s perceived risk profile, this has not worked despite the Southern African region having received over US$10 billion in FDI in 2012.

Whereas under normal circumstances Zimbabwe like many other members of multilateral lenders could also turn to global lenders for funding assistance the avenue is shut out as the country is not eligible due to arrears from previous loans.

Further, most other bilateral lenders take a cue from the International Monetary Fund and the World Bank that obviously are controlled by Western countries with which Zimbabwe currently does enjoy very cordial relations since the fall out in 2000 when it redistribute whites occupied land to majority blacks.

It means Zimbabwe might not be getting any funding from Bretton Woods institutions and related lenders remote controlled from the West for as long as it will also not be able to freely deal with the countries minus the economic embargo.

But with such a scenario, Finance Minister Patrick Chinamasa has pleaded with the global lenders to at least consider shifting from insisting on the country clearing its arrears first before being eligible for low priced long term funding once again. But without ruling anything out, this remains a tricky issue.

However, as Minister Chinamasa said, without access to affordable long term and medium funding most of the efforts Zimbabwe is pursuing could come to nothing.

Still, the Government and industry require funding to execute economic growth and development programmes.
With sources of foreign funding remaining a tricky proposition aggressive domestic funding mobilisation seems sensible.

Economic analyst and Veneka Capital managing director Mr Terence Mukupe suggested mobilising domestic capital as an alternative to waiting on hostile foreign lenders to shift from their long held positions and reluctance to assist Zimbabwe.

Such measures, he said, would include legislation that compels banks to lend to productive sectors of the economy a prescribed threshold of their deposits failure of which would result in the balances being swept to the Reserve Bank of Zimbabwe.

The funds would be invested to deserving sectors of the economy.
Others may legislating credit extension would dampen confidence of foreign investors, but analysts believe that looking at history only specific types of investors with strong distinct interests will come to Zimbabwe and not all investors.

Economic analysts believe that the majority of investors Zimbabwe will attract will include those looking for elusive resources such as diamonds, platinum and gold and that those already invested will never divest for whatever reasons.

The conception is based on the fact that some banks, especially foreign owned institutions appear reluctant to support productive sectors and where they have done so most of their loans go to selected blue chip companies or individuals.

Such banks’ lending terms and conditions determined in their foreign headquarters make it difficult for local industry to borrow given the stringent lending criteria based on the Western template with stable economies, being used in a fragile developing economy ravaged by sanctions induced recession.

Mr Mukupe added that Zimbabwe could also consider enacting foreign exchange laws compelling multinationals, especially mining firms, to bank proceeds of their exports in the country except for funding needed to import capital goods.

As things stand, foreign companies freely bank proceeds from their exports in offshore accounts and possibly further prejudice efforts to improve liquidity through transfer pricing, something still unproven, but widely feared to be rampant.

All what Zimbabwe eventually benefits from after billions of exports are salaries, a little spent on local procurement, taxes to Government and salaries to workers.

“No matter how good the policies or how good the policies are, if there is no money everything that Government is working on is going to fail,” Mr Mukupe said.

Other analysts also called for legislation on prioritization of local procurement to conserve liquidity that should ideally find its way to productive sectors of the economy.

In general, banks also need to step up deposit mobilisation and increase lending to productive sectors including small to medium enterprises that carried this economy during the country’s worst economic crisis in the history of Zimbabwe.

While domestic mobilisation of funding through secularization of mineral resources appears cumbersome and daunting it remains one viable internally generated solution in view of the vast mineral abundance the country is endowed with.