Ballooning debt chokes industry

LIVINGSTONE MARUFU

The country’s rising external debt is a deterrent to local industry’s chances of courting the much needed fresh offshore capital to recover, captains of industry have said.

The government has struggled to clear public debt, which has now ballooned to about US$13.4bn according to official data obtained from the Treasury.

Captains of industry told Business Times this week that the toxic debt burden has contributed  significantly  to the crisis facing Zimbabwe as most lenders across the globe have now become risk averse when dealing with Zimbabwe companies.

Industrialist Busisa Moyo said Zimbabwe’s problems are hinged on failure to pay creditors.

“…The failure to clear debt has harmed us as we have failed to get meaningful lines of credit,” Moyo said.

“The industry has supported the clearance of external debt since 2014 so that the country can unlock credit lines which are critical for transformational programmes, infrastructure, economic expansion and a cushion against economic shocks.”

Added Moyo: “This starts with a successful  (International Monetary Fund) Staff Monitored Programmes which will require macro-economic stability; low inflation, a sustainable framework for foreign currency, a sound financial services sector and market discipline (low incidence of overt corruption & black swan events) [support the success of an SMP Programme  and re-engagement of arrears clearance].”

Offshore suppliers of critical raw materials have also cut off Zimbabwe and are now demanding pre-payments in the event that they are willing to supply local companies.

The Confederation of Zimbabwe Industries president Kurai Matsheza said: “We can’t get credit lines even from our all-weather friends as we have a track record  of not repaying debts hence that has affected us over the years. And without huge capital investment on machinery and infrastructure there is no growth to talk about.”

Out of the US$13.4bn debt, close to US$10bn is accumulated arrears, meaning the principal debt is about US$3bn.

The total debt burden represents 89% of GDP, a ratio which exceeds the 70% provided in the Public Debt Management Act (Chapter 22:21) and Sadc’s 60% threshold. This implies that the country is in debt distress.

The debt figures do not include other RBZ running facilities guaranteed by the government, amounting to US$379m and blocked funds amounting to US$2.8bn (still under due diligence pending debt assumption).

The Zimbabwe National Chamber of Commerce CEO, Christopher Mugaga said no debt should ever be procured without the involvement of the Parliament in the interest of “transparency, accountability and confidence building”.

“This also applies to the assumption of debts by the RBZ, which, if not guaranteed, will see the public paying for other people’s private debts,” Mugaga said.