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Victoria Ruzvidzo Business Focus
Zimbabwe’s liquidity challenge could improve somewhat in the short to medium term, with a number of facilities lined up to inject funds into the economy.
The recent ones being the $100 million that Barclays Banks says it will soon avail to support business and a similar amount destined for the mining sector that will come through a credit facility by Chinese firm, Xuzhou Construction Machinery Group.
The scheme will be managed through CBZ Bank. Although these fall far short of demand, with industry alone requiring at least $2 billion to recapitalise, we commend the initiatives that will certainly make a difference in this financially-dry economy. $100 million is certainly no small change. It will help some firms to retool or to provide working capital.

The low production capacity being reported by industry is sad and continues to deteriorate.
Liquidity is Zimbabwe’s greatest challenge besetting the economy with almost all problems coming out as offshoots.

Indications in yesterday’s paper that small-scale miners will access loans from the Chinese firm to acquire equipment will certainly improve viability.
In fact, annual gold production is set to reach at least 14 tonnes from the current four once the small-scale miners are equipped. The offshoots of the current liquidity constraints include company closures, stagnation and downsizing which have become endemic in this economy, with far reaching economic and social repercussions.

The absence of offshore finance facilities and sustainable domestic capital raising initiatives have compounded an already precarious financial state of the economy. Early this week, Bulawayo city fathers were lamenting the absence of funds to revive firms as having dampened the 112 years anniversary of the City of Kings.

Hundreds of companies have indeed closed in the last few years while others are barely surviving.
Thousands of jobs have also been lost in the process but the situation, for some, is still redeemable if more lines of credit are extended to the economy.

It has been noted in this column and other forums that offshore lines of credit are a source which can substantially mitigate the pervasive ills in the economy.
A lot more has been written on the causes of the liquidity crunch and potential solutions, with diverse opinions proffered. Because domestic coffers are either dry or grossly inadequate, it thus stands to reason that foreign sources should be aggressively pursued.

At least the Barclays cash injection will be available within the next few weeks, bringing some relief to beneficiaries.
The bank insists that it will lend strictly to companies with demonstrable cash inflows. This is not too difficult to understand. The available resources will need to be invested in firms with better prospects of repaying the loans and contributing significantly to the Gross Domestic Product. However, other firms that may not have sound books but demonstrate great potential will also need to be assisted once more funds become available so that they can begin to operate viably again.

Our present funding challenges call for expeditious action to arrest further deterioration. The Government’s stance to aggressively seek and promote foreign investment should see us move in the right direction. It is a sad reality that companies are encumbered by challenges which have seen substantial decline in production and service delivery.

Unemployment, an ill for a protracted period now, is further worsened by the aforementioned company closures.
Subsequently, many breadwinners are presently out of employment, hence survival becomes a daily struggle.

Production is unsustainably low – an economy cannot function if does not produce, period. Last year we imported goods worth more than US$8 billion and yet we managed to export only US$3 billion worth of goods and services.

Such a situation is untenable. Broadly speaking, imports chew up resources and negate local production.
With local resources diminishing, imports have the discernible effect of compounding an already dire situation where funds could be directed to production. This economy simply needs to export at much higher levels and yet this is clearly not feasible when production is low. Hence any initiative meant to increase production is laudable.

This Barclays Bank initiative should be complemented by other players in the financial sector.
Similar commitment would augment our coffers, increase production, mitigate unemployment, improve export levels and ease, if not obliterate liquidity challenges.

Of course we are all too aware of the challenges that banks are facing in their quest to secure lines of credit but they need to be more aggressive and ensure they convince financiers that putting resources in this country pays dividends that go beyond the mere value of money. Barclays managing director Mr George Guvamatanga was spot-on.

“The economic landscape requires decisive intervention to enhance investor confidence, promote local production and contain the imports bill.”
He said perceived instability and negative perception about Zimbabwe would not keep investors at bay as had been demonstrated by investors who went into countries ravaged by civil wars.

“It’s very simple, capital does not look for stability, capital looks for clarity and that is what we have been sharing with the relevant stakeholders here, that its crucial for us to provide clarity,” he said on the sidelines of the Imara Investment Conference last week.

This was in apparent reference to policy inconsistency by Government in some cases, where conflicting statements are sometimes made on pertinent issues concerning the economy.

The Reserve Bank of Zimbabwe should also spearhead a spirited campaign to lure external funding. It may not find much joy with such bodies as the International Monetary Fund but other multilateral and bilateral lenders should be approachable. The fact that RBZ Governor Dr John Mangudya sits on the Africa Export and Import Bank board should augur well for Zimbabwe.

He needs to use that position to bring more funds home so the economy can be revived effectively. Afrexim Bank has been supportive of this country in the last few years so we expect to see more facilities from the lender.

Our largest trading partner, South Africa should also make good promises it made years ago to lend us money. That economy has not been spared by the effects of the global economic instability but that’s not to say it does not have a few billion rand to assist one of its biggest customers. Others lenders should buy into the country vision and help in its realisation. Evidently, it is not just the financial services sector we should look up to for solutions. Government, labour and the private sector and yes, the media too, among others, should exhibit leadership as we move forward.

No challenge is insurmountable and we all have to pull in the same direction, leaving no stone unturned. We cannot afford to sit on our laurels.
President Mugabe recently launched a spirited campaign to attract foreign direct investment as one sustainable way to bring in fresh capital.

He needs all the support he can get from his lieutenants and all stakeholders.
We must also commend our Chinese friends for chipping in with lines of credit and investments to re-oil Zimbabwe’s economic engine.

Its latest intervention, the $100 million facility for small-scale miners is expected to give impetus to that sector and the mining industry in general.
“We are happy to support Zimbabwe build its mining sector as mining is the backbone of the country’s economy,” said Xuzhou chairman Mr Wang Yan Song in Harare on Tuesday.

That is as it should be.

In God I Trust!

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