The Sunday News
OLD Mutual has agreed in principle to fund the second phase of the Distressed Industries and Marginalised Areas Fund (Dimaf) as Government moves to create an industrial development fund aimed at capacitating the country’s ailing firms.
In an interview, Industry and Commerce Deputy Minister Cde Chiratidzo Iris Mabuwa said negotiations with the financier were almost done although she could not reveal how much the company would provide.
“We are at an advanced stage in discussions with the financier and they have promised to give us another seed fund to add onto the first tranche of $28 million. We are not only discussing with the current financier we are also discussing with others.
“We are really looking forward to building an industrial development fund but the issue is about the approach we have to use, a value chain approach for value addition,” Cde Mabuwa said.
She said the ministry was in the process of remodelling Dimaf with a view of ensuring that the companies that benefit from the funding were also assisted to effectively run their operations financially and administratively for the purpose of sustainability.
“We are going to employ specialists, not judicial managers but we are going to be looking at employing some experts to come and help incubate the businesses that are weak and have their management trained and they leave. It’s sort of a business rescue or business development plan,” Cde Mabuwa said.
She said although Old Mutual was set to be the major financier for Dimaf II, Government was casting its net wide to entice potential financiers.
Dimaf was formed in 2010 to help companies retool while disbursement started in 2011.
Government and Old Mutual were supposed to inject $20 million each. To date, Old Mutual has put in $28 million. Old Mutual’s subsidiary, CABS, manages the fund.
Since 2011, 48 companies, about half of them from Bulawayo, have received loans worth $28 million from fund.
Companies hardest hit by the economic challenges of the past decade were mainly located in Bulawayo, once the country’s industrial hub that employed thousands of people.
About 100 companies have since 2009 closed shop in Bulawayo, leaving more than 20 000 workers jobless.
However, Dimaf continues to be a contentious issue with some companies in the designated areas complaining that accessing the fund was almost impossible.
Previously, the minimum requirements for companies to qualify to access the funds included two years accounts in the form of management accounts or financial accounts, acceptable collateral, clean tax records, projections for capital expenditure loans, budgets and cash flows, among others.
Cde Mabuwa said there was a need to discourage the culture of defaulting on loan payments, which has been rampant over the past few years.
“We will make sure that we don’t have the issue of non-performing loans and make sure that we inculcate entrepreneurship development in the process so that we make sure we find you in your business and when we find that you are very envisioned but the management aspect is lacking we bring in managers for a makeover of your business.”
She said the fund would not only be channelled towards resuscitating struggling firms but would also be directed towards financing youths and up-and-coming entrepreneurs’ projects.
Captains of industry said the implementation of Dimaf II was a step in the right direction but should be modelled in a way in which conditions for borrowing are specifically designed to suit ailing entities.
Confederation of Zimbabwe Industries president Mr Busisa Moyo said there was a need to create a platform which enhances businesses’ competitiveness before the disbursement of the fund to enable companies to effectively sustain their operations.
“It’s a positive development we welcome that because companies need support but it must be based on a plan which encourages value chain. It must be premised on a comprehensive plan which takes into consideration issues of enhancing competitiveness because companies don’t need funding only as the policy environment needs to be changed as well,” Mr Moyo said.
Association for Business in Zimbabwe chief executive officer Dr Lucky Mlilo said the facility should come with low costs of borrowing so as to ensure the recovery of the ailing entities.
“Any money coming to resuscitate business is welcome but it will be interesting to find out at what interest rate will the loans be paid back. There is need know if the fund is affordable to distressed companies or those who are still in business.
“Companies have been suffering from high cost of borrowing and a short tenure. Companies that managed to pay back from the first funding were those that were under judicial management while others struggled to do so,” Dr Mlilo said.
