Govt domestic debt crippling industry Industry and Commerce Minister Mike Bimha (left) chats with Brigadier-General Josphat Kudumba (centre) and Colonel Joel Muzvidziwa at the Zimbabwe Staff College yesterday. - (Picture by John Manzongo)
Industry and Commerce Minister Mike Bimha (left) chats with Brigadier-General Josphat Kudumba (centre) and Colonel Joel Muzvidziwa at the Zimbabwe Staff College yesterday. - (Picture by John Manzongo)

Industry and Commerce Minister Mike Bimha (left) chats with Brigadier-General Josphat Kudumba (centre) and Colonel Joel Muzvidziwa at the Zimbabwe Staff College yesterday. – (Picture by John Manzongo)

Debts which the Zimbabwe Government owes some local companies for goods and services is seriously impacting on their viability, a Cabinet minister said yesterday.

The Government owes various companies including seed and fertiliser manufacturers millions of dollars for goods and services.

By November last year, the domestic debt stood at $1,1 billion while the Government also owed multilateral lenders an estimated $10 billion.

Industry and Commerce Minister Mike Bimha told the Joint Command and Staff Course Number 28 at the Zimbabwe Staff College that the Government should honour its obligations to local firms since it was a major player in procurement.

“A number of local companies are owed to a large extent by Government departments, causing great distress and viability problems,” he said.

“Since the Government is a major player,

the accumulation of domestic arrears is also creating gridlocks in the national payment

process with a knock-on effect on the movement of money in the economy. This is worsening the liquidity situation for the productive sector.”

Minister Bimha, however, did not say how much the Government owed.

He said many local companies were failing to secure funding to retool and boost production as most loan facilities available were expensive and of a short-term nature.

The prevailing liquidity crunch had resulted in an increasingly difficult trading environment putting businesses under increasing stress, he said.

Minister Bimha said there was urgent need to put in place measures that promoted internal circulation of money to assist struggling firms secure funds for recapitalisation.

“The majority of distressed companies are overborrowed and in debt and will have registered first mortgage bonds over their assets in favour of the first lender.

“In seeking second tranche loans to extricate themselves from distress, they will often be required to register second mortgage bonds on the same assets, but because of declining asset values, second mortgage bonds will have negligible surrender value so the second banks will not be willing to lend,” he said.

The Reserve Bank of Zimbabwe has been tasked to source funding from external financiers for industry while Government re-engages Old Mutual in reviewing terms of their partnership under the Distressed Industries and Marginalised Areas Fund (DIMAF).

“Our industry is currently in a bad state due to lack of funding but as you heard from the RBZ Governor Dr (John) Mangudya’s monetary policy statement, the central bank will have to play a critical role of sourcing funds for Government to revive the industry.

“This stems from the fact that RBZ is in a good standing to fulfil the role.

“Negotiations with CABS are at an advanced stage under the Dimaf facility and I hope once new terms are agreed. This will go a long way in playing a part in industry revival,” said Minister Bimha. – New Ziana/Business Reporter.

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