|DiMAF remains pie in the sky: AfDB|
|Friday, 29 June 2012 11:29|
Senior Business Reporter
THE African Development Bank says the hopes pinned on the Government’s Distressed Industries and Marginalised Areas Fund (DiMAF) remain unfulfilled for local firms, although it is the only available policy to rescue them.
There had been huge expectations from the corporate sector when the policy instrument was announced in 2011 amid hopes that the fund would help alleviate the financial problems. But only private funds have been made available, with no input or guarantee from the Government, hence the stiff lending terms.
“No other measures have yet been put in place to address this,” the regional bank said. “Hence DiMAF remains only a policy tool at hand. It is important to ensure the implementation of the policy is given the priority it deserves.”
“One such condition is that companies that are under provisional liquidation are not allowed to benefit from DiMAF, even though the majority of the distressed companies fall under such a category,” the bank added.
Furthermore, only collateral security of first mortgage bonds over immovable property would be accepted to unlock funding, which would be a challenge to most of the “distressed and marginalised” companies who use rented premises. As such, DiMAF has failed to live up to expectations.
Government was supposed to contribute US$20 million, with Old Mutual chipping in with the other US$20 million. But that has not happened.
DiMAF was established as a solution to reverse the trend where over 87 companies had ceased operations while many others relocated to Harare, as others downsized operations. According to Industry and Commerce Minister Professor Welshman Ncube the local industry requires at least of US$2 billion to recapitalise.
Local companies have not replaced old and antiquated equipment over the last decade when the economic downturn reached its peak, but have set out to regenerate the industrial base, after stabilisation of the economy in 2009.
Economic activity has not and may not reach the desired levels in the absence of a significant dose of funding to re-establish the industrial base of years gone by.