Industry endorses proposed Debt Assumption Bill
TINASHE MAKICHI
Industry has endorsed a proposal from the Minister of Finance and Economic Development Minister Mthuli Ncube to introduce a Debt Assumption Bill in Parliament for blocked funds amid concerns the legacy debts have left local companies reeling from weak balance sheets and viability problems.
Blocked funds amount to US$3.3bn incurred by local companies.
Presenting his 2022 National Budget in Parliament, Ncube said the passage of the Bill would result in the government taking over the blocked funds debt.
Industry has endorsed the debt plan citing the need for the government to come up with a concrete settlement period.
“As long as these funds are not settled timeously, getting credit lines will be difficult,” Confederation of Zimbabwe Industries president Kurai Masheza told Business Times.
“These funds are for various settlements; dividends, supply creditors, consultancy services among others and hence unlocking any further support will remain an issue until these funds are received at the other end.”
The legacy debt to foreign creditors has continued to hinder industry recovery.
The viability of several companies has been under serious threat as the unsettled foreign obligations have seen some suppliers of critical raw materials cutting supplies to Zimbabwe.
Reserve Bank of Zimbabwe (RBZ) Governor John Mangudya last year announced that all foreign liabilities or legacy debts due to suppliers and service providers such as the International Air Transport Association, declared dividends among others, shall be treated separately after registering such transactions with Exchange Control.
A player in the cooking oil industry added that this was the first time that the government has proposed a concrete plan aimed to clear the blocked funds.
“This is a welcome development and as you are aware, cooking oil manufacturers have been among the most affected in terms of raw material supply due to the blocked funds. There was no clear roadmap but this initiative has put to rest some of our fears,” the cooking oil manufacturer said.
Most companies in the cooking oil industry have been facing raw material challenges as suppliers closed tap until a clear settlement plan of debts is laid out. In some instances, most manufacturers were now forced to do cash transactions as suppliers have since suspended availing raw materials on credit.
These legacy foreign debts, which were assumed by the central bank in accordance with Circular 8 of 2019, cover the period between January 2016 and February 2019.
Another debt instrument proposed in the past was the US$ denominated savings bond which had interest rate of 7.5% per annum, a minimum tenure of one year, enjoys tax exemption in line with government policy, has liquid asset status, and is tradable and accepted as collateral for overnight accommodation by the RBZ.
One of the financial instruments was supposed to address the accounting issues especially on companies listed on the Zimbabwe Stock Exchange.
The Apex bank’s Exchange Control, has to date processed and validated blocked funds amounting to US$1.2bn.
