By Shame Makoshori
A DEPUTY minister has made stunning revelations that industry captains abused a US$40 million package to rescue ailing industries by splurging on luxury vehicles for exclusive lifestyles, leaving their companies tottering on the brink of collapse.
More money from the Distressed Industries and Marginalised Areas Fund (DIMAF), jointly funded by Old Mutual and government, was diverted towards servicing expensive loans, rather than supporting the companies by funding working capital, Industry and Commerce Deputy Minister, Chiratidzo Mabuwa, claimed at a recent Buy Zimbabwe Retailers and Suppliers conference held in the capital.
“Firms benefitted but… the monies went into servicing overdrafts and purchasing expensive cars. They (companies) just simply did not (re)pay. They are still being chased,” said Mabuwa.
DIMAF was established three years ago to fund the recovery of struggling industries and bolster economic growth. The fund was a culmination of a deal in 2010 between former Finance Minister, Tendai Biti and Zimbabwe Stock Exchange-listed insurance giant, Old Mutual Zimbabwe Limited, which undertook to fund the recovery of failing industries in a market laden by high default rates.
Old Mutual would inject US$20 million towards the fund, while government undertook to chip in with another US$20 million. In July government, which failed to fulfil its US$20 million promise, said 48 firms had accessed the funds administered by Old Mutual’s banking unit, CABS Building Society. But the deterioration of industries has escalated with at least 10 firms estimated to be shutting down every month. About 64 percent of industries’ installed capacity is estimated to be idle.
In a no-holds-barred discussion with executives at the annual Buy Zimbabwe conference where she attacked them for dishonesty, while redirecting her fire to government for not honouring crucial commitments, Mabuwa gave a glimpse into how the fund has been misused to oil the private lifestyles of individuals while the institutions they lead crumble.
“The private sector played their part but government did not contribute what it had promised. The then minister of finance said there was no fiscal space. The question of who would administer it became an issue between the Minister of Finance and the Minister of Industry and Commerce,” Mabuwa said, referring to bickering within government over the fund.
Welshman Ncube, who leads a break-away formation of the MDC, was the minister of industry and commerce. DIMAF had concessionary lending rates which were far lower than prevailing interest rates, which have stifled industry and hurt economic growth.
In July, the Reserve Bank of Zimbabwe said 18,5 percent of loans advanced to the market were not performing, placing banks in a precarious situation. Banks have responded by establishing stringent lending regimes to avoid collapse.
Turning to import duties charged on various goods, including raw materials that industry said had crippled operations, Mabuwa said government was prepared to listen to companies’ concerns.
However, it would not allow industrialists to manipulate the tax system. “Don’t strip and dress,” she said, referring to shoe manufacturers who complained that they were charged rates of finished shoes when they imported raw materials.
“Don’t come to join it in here and say you have manufactured it. We can’t allow you to strip a shoe and come here and join it and say you have manufactured it because we will kill Bata (Shoe Company); we will kill everything. Are you seriously saying I am producing when you are joining two pieces that have already been produced? Show us that there is value addition. We have G&D Shoes that has closed and they are crying foul over the things that you have said.”
She fired a broadside on personal care products manufacturers who complained that duty on imported petroleum jelly was pegged and computed at the levels used for finished products.
“The petroleum jelly issue is on my table now. Is it being used by the pharmaceutical industry that is not operating? You want us to exempt duty and then you package it and sale it as a finished product? Which pharmaceutical firm is operating now?” she asked. Financial Gazette