They (sanctions) are the reason why we have to pay cash when importing things. Now does anyone still believe that a) there are no economic sanctions against Zimbabwe and b) they don't impact the economy? Would anyone like to apologize, perhaps?
‘Sanctions truly have an effect’
Saturday, 25 June 2011 23:47
Of late, many companies in Bulawayo have either totally collapsed, scaled down production or relocated to Harare, in a manner that points to a crisis. Augustine Moyo (AM), our Business Editor, questioned Professor Welshman Ncube (WN), the Minister of Industry and Commerce, on the matter.
AM: How many companies have closed shop in Bulawayo alone?
WN: We have a total of 85 companies and this is the breakdown — 19 companies in the clothing and textiles industry, 63 companies in the motor industry and three in the construction industry. However, some have relocated.
AM: Which ones have relocated?
WN: Hunyani Corrugated, Hunyani Packaging and starafricacorporation. They have closed their Bulawayo operations and relocated to Harare.
AM: Eight-five companies collapsing is catastrophic and more of a national crisis. What is the real issue affecting these companies?
WN: The single biggest challenge affecting almost all the companies in the country is access to affordable long-term finance. If we solve this one we would have solved 50 percent of the problems affecting industry.
Most companies are forced to take short-term finance from financial institutions and that money is then due and payable before industry has even completed their production cycle. For example, three-month finance.
A company imports raw materials. They take two months to arrive in the country. By the time they start manufacturing and even before they take their products to the market, the money is due.
Then they will approach another financial institution to borrow to pay back Bank A. When they pay back Bank A, they would have borrowed from Bank B on another short-term finance and it becomes a vicious cycle.
When Bank B is due they have to run around to borrow elsewhere again and, mind you, they are borrowing at interest rates of 22 percent and above. These interest rates are prohibitive. Even when the companies have sold their products, they just cannot recover what they have put in to produce a product. You just cannot put a 22 percent mark-up on the US dollar. It’s impossible.
AM: So in a way, short-term financing has increased the vulnerability of companies?
WN: Yes, actually those that do not borrow are much better off than those that borrow.
AM: Is that all?
WN: There is the issue of tariffs and competition from imported goods. Our companies are charged 25 percent on raw materials by Zimra, for example, material to make a suit. Someone from Lesotho making the same suit buys the material in bulk. Remember Lesotho is an AGOA country and in the process enjoys discounts, long-term finance and makes more suits than the United States of America needs. Lesotho is part of Sadc and its products come here duty free. Now competing with someone from Lesotho exporting duty free to Zimbabwe gives them an unfair advantage over our local companies who have to pay duty for all the raw materials, including dyes for materials.
Add smuggling, the corruption at Beitbridge. You have a whole lot of corruption at the border post. Someone brings in a container of shoes and clothes and bribes a Zimra official at the border and they pay no duty and you find a container of shoes that did not pay duty on sale at the Nigerian section of Harare. Then you expect a local shoe manufacturer to compete with that. This is what I call the tariff regime challenge. We need to find rationalisation in this issue.
The third challenge is that on utilities generally. We are told that our electricity is the cheapest in the Sadc region but our incomes, our production is much lower vis-a-vis the region.
It does not make sense to tell me that that electricity in South Africa is US$0,11c/kW and here in Zimbabwe it is US$0,07c/kW when a person such as the editor of the business section of The Star gets 10 times what you get then you tell me that the SA electricity tariff is higher than that of Zimbabwe, while the business editor of The Sunday Mail takes home US$500.
It’s the same in business. You have this electricity tariff which is totally unsustainable. Add to this that Zesa will switch you off anytime, unannounced and you are in the middle of production. Let me give you the example of Datlabs and Varichem, which manufacture pharmaceuticals, and they put in their raw materials in the production line.
The moment they are in the production line for more than 30 minutes and there is no power they have to be thrown away. These are medicines and they can only be subjected to certain temperatures for a certain time. Zesa will switch you off again and again.
This also disturbs your production cycle. For example, Datlabs and Varichem have to run their machines for at least three hours before raw materials can be put on the production line. Within the three hours Zesa switches them off again. By the way, your workers are sitting there doing nothing and you still have to pay them. Power must be uninterrupted for industry to meet its full production cycle.
Add the high costs of water, rates, rent, which have no relationship with what companies are producing. Which businessman can pay rentals over US$10 000 a month? When it comes to labour, employees are underpaid and can’t make ends meet.
AM: You are talking about all these issues but what have you done to address them?
WN: These are issues which don’t fall within the purview of my ministry alone. They are issues which are Government-wide. My authority as the minister are things which happen in industry. I have no control over the corruption at Beitbridge Border Post, I can’t stop it. I have no authority over Zesa either, I can’t deal with it.
So this is why, for instance, Cabinet said let us have an inter-ministerial committee on industry, we said let’s try and bring as many of the relevant ministries as possible so that we can find a holistic solution throughout Government to address some of these challenges. If all ministries put their shoulder on the wheel and we work together, I have no doubt that industry will rebound.
AM: You have not mentioned sanctions as part of the real issues. Are they not part of the problem?
WN: Of course, sanctions are part of the problem! They are the reason we don’t have lines of credit. They are the reason we have to pay cash when importing things. All of these things have to do with the fact that we have a bad trade image and that bad trade image is as a result of sanctions applied against us which made us fail to pay our debts in time or to pay them at all.
So clearly, clearly, clearly sanctions are part of the problem and that is why we have consistently, consistently said sanctions must be lifted in accordance with the GPA. We agreed as the three political parties to the GPA that sanctions must go. It was not an accident.
It was not an esoteric thing. It was because they are real, they affect us. If they were not real why would those who impose them maintain them if they are meaningless? The argument by some that sanctions are meaningless is nonsensical! Why would those who impose them maintain them if they have no effect? They are maintained because they have an effect. In my view, if you took away sanctions you will open up the flow of money into the country. You will deal with the bad image of the country creditwise and we will have that extra kick or impetus to move forward. So all of these things are inter-related; they are linked.
AM: Professor, there are some in the inclusive Government that do not believe that sanctions do actually exist. So how can you say you are all agreed that they exist and they must go?
WN: I can’t speak for what others say behind closed doors or in the dark, but in broad daylight and in Cabinet, everyone agrees that sanctions must go and they signed to it. All the three parties are represented in the re-engagement committee, which is supposed to lobby for the lifting of these sanctions. Even at the recent Sadc Summit this thing was discussed extensively and there was a report on the effect of sanctions on Zimbabwe and Sadc’s attempts to lobby for their lifting.
We were unanimous, we were unanimous as the leaders of the three parties. President Mugabe, Prime Minister Tsvangirai and myself were unanimous that Sadc must help us and that we will do everything in our power to call for the lifting of sanctions — all of us. So when we speak to each other, when we speak in daylight we say the same thing, but I can’t speak for others when they speak somewhere at night. I can’t.
AM: We have companies like starafrica and Hunyani, amongst others, that have closed shop in Bulawayo and relocated to Harare. You have been vocal in saying this is marginalisation of Bulawayo.
WN: No doubt there are issues affecting the whole economy and no doubt there are issues affecting companies in Harare and that is a nationwide problem, but Bulawayo has been acutely affected. It was at one time the industrialisation hub of the country.
Historically, Bulawayo was an industrial hub while Harare was an administrative city. However, there are things which are peculiar to Bulawayo which the people feel acutely.
AM: Give us examples. Let us not generalise. What are the issues?
WN: Banks are headquartered in Harare and if businesspeople in Bulawayo apply for loans, their applications are sent to Harare and decisions have to be made in Harare. When a bank has US$30 million to disburse, Harare-based companies have an advantage over the Bulawayo-based companies. Another example is: recently, the RBZ advertised that it was disposing of its stake in some companies and it was clearly written that bids be submitted to the RBZ Headquarters in Samora Machel Avenue in Harare.
It is after businesspeople in Bulawayo complained that the RBZ authorised its Bulawayo branch to accept bids in Bulawayo.
Another example is that of Arenel Biscuits. It gets its sugar from starafricacorporation and gets its packaging from Hunyani. These two companies have since closed shop in Bulawayo and relocated to Harare.
Arenel finds that 80 percent of its inputs have relocated to Harare then it also has to, not out of choice, move to Harare as well. You see it’s such things that convince the people in Bulawayo that they are being systematically marginalised.
AM: Professor, you seem to be gaining cheap political mileage from Matabeleland by mixing issues of the demise of industry in Bulawayo with the sensitive issue of the 1980s atrocities or Gukurahundi. Why?
WN: That is not true. The truth of the matter is that a Zimpapers journalist from The Chronicle called me for an interview when I was in Bulawayo touring the industries and I told him that I was very busy and could not meet him.
He insisted that he wanted to get a comment from me on my committee’s findings on the state of industry in Bulawayo and I agreed that we meet before I meet with my committee. Your journalist then diverted from his intention and asked questions about the Gukurahundi and my views about Mthwakazi Front. Now questions imposed by you the media are being reconstructed as a campaign.
However, that being that, I have considerable difficulty as an individual that there are certain parts of our history that we must hide. Why is it right to talk about the brutality of the Ian Smith regime and it is not right to talk about the Gukurahundi in Midlands and Matabeleland as if it never happened?
It should not have happened and must never ever, I repeat, never happen again! How do you run a country on dishonesty? It is not right to reject people’s experiences as if they never happened. Do you ask the
Black Americans to forget that slavery never happened when it is actually a painful part of their history?
It is only when we face the issue, deal with and admit it happened that we find peace amongst ourselves and begin on the path to national reconciliation.
AM: You are presiding over a ministry which is key to the heartbeat of the economy and nothing is functioning. What happened to lines of credit like the US$70 million from Botswana? Where is that money and why are you not channelling it to industry?
WN: You have to appreciate that we have been all over looking for lines of credit for industry and again you must appreciate that the way governments work is protracted and bureaucratic. Most of these monies have been in promises that have not come through.
AM: There has been optimism among Zimbabweans that the formation of the inclusive Government would lead to the recovery of industry, creation of jobs and the general recovery of the economy but this has not been so. Are you failing as Government or what?
WN: In a Government of three political parties what do you expect? Even if you have one Government in power you will find individuals with ideological persuasions. Every Cabinet meeting, every inter-ministerial meeting we have is like a renegotiation.
So we are constantly renegotiating. However, having said that, I must say there is more that binds us than that that divides us. I must say there has been an improvement though, despite the challenges in industry.
In February 2009, 95 percent of products in the retail sector were imported.
Now we have a situation where 30 percent of the products are locally manufactured.
After 15 years of economic decline, this is notable.
We are 50 percent from the ideal but we are in the right direction.-The Sunday Mail
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