HARARE — Zimbabwe’s engineering and metals industry requires nearly $700 000 annually for value addition as the country continues to be dependent on unprocessed mineral resources, a study carried out by a local think-tank has shown.
A field study carried out by the Zimbabwe Economic Policy Analysis Research Unit (Zeparu) on 94 companies and stakeholders around major commercial centres in the country showed that policy inconsistency and high borrowing rates were discouraging the industry from undertaking beneficiation initiatives.
The report said that with adequate funding, the sector has the potential to contribute over$14 billion dollars per annum in revenue to the economy.
“The annual operational requirements according to the respondents averaged about $240 000, with an annual requirement of about $660 000,” Zeparu said in the report.
“About 85% of the respondents indicated that their capital requirements were financed from within the company while 15% indicated shareholders as the source of funds.
“This parameter shows the difficulty that stakeholders in this sector have in getting funding from banks and related financial institutions.
“None of the respondents have any loan with any lender or other sources.”
Two main and only reasons cited for not borrowing were unfavourable interest rates and high collateral requirements.
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The study results showed that the Zimbabwean engineering and metals sector was generally not competitive globally. The sector had an overall trade deficit of about $3,3 billion for the period 2008 to 2012, translating into an average deficit of about $660 million per year.
Exports constituted $7 billion of trade against $10 billion in imports over the same period.
“The diagnostic study showed that the engineering and metals sector was severely distressed with a very low average capacity utilisation of about 28%,” Zeparu said.
Zimbabwe had a vibrant and diversified engineering and metals sector which dominated the Sadc region (except for South Africa) prior to the decade long economic crisis at the turn of the millennium which saw the closure of many actors in the sector, Zeparu said.
— The Source
