Tuesday, November 27, 2012

(NEWZIMBABWE) Government mulls industrial bank

Government mulls industrial bank
26/11/2012 00:00:00
by Paradzai Brian Paradza

THE government is considering setting establishing an industrial bank to help address working capital constrains which continue to hold back efforts fire growth in the sector, a Cabinet minister has confirmed.

Capacity utilisation in the sector, which has struggled to emerge from the economic recession of the last decade, dropped 13 percent this year to about 44 percent.

Industry and Commerce Minister Welshman Ncube blamed the high cost of finance on the local market as well as difficulties in securing international credit lines for the sector’s problems.

[Like the credit freeze put on the government and country of Zimbabwe through the Zimbabwe Democracy and Economic Recovery Act of 2001, Section 4C. - MrK]

“We witnessed some growth in the first few years of the Inclusive government and we were actually the fastest rising economy at that time, but after that we experienced a reversal of growth,” Ncube said in an interview with NewZimbabwe.com.

“One major constraint we have found to be at the centre of the current challenges affecting industry is the availability of capital. For this reason government is mulling having an industrial bank whose purpose would be to finance industry at reasonable rates.”

A recent survey by the Confederation of Zimbabwe Industries (CZI) revealed that the manufacturing sector was in limbo with capacity utilisation plummeting amid huge influx of cheap imported goods from both regional and overseas.
The high cost of borrowing was also identified as the major constraint affecting industrial production.

But past Bankers Association of Zimbabwe President John Mangudya rejected claims that financial institutions were holding back economic growth by starving key sectors of much needed credit.

“I don’t think that’s the whole reason. This is a free market economy, why then should the sector be treated differently,” said Mangudya at the launch of the survey.

Still, Finance Minister Tendai Biti has projected that the economy would grow by 5% in 2013 on the back of improved performance from key sectors such as manufacturing, agriculture and the mining sector.

“Overall growth is projected to moderate to 5% in 2013, underpinned by anticipated output improvements in mining and agriculture,” Biti said while presented his budget for next year.

“In 2013, the manufacturing sector is projected to grow by 3%, underpinned by implementation of the Industrial Development Policy, anticipated lines of credit, fiscal incentives as well as a favourable agriculture season.”



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