Business decries ‘shackles’ on IDCZ

13

WHILE the government has lauded what it sees as the revival of the Industrial Development Corporation of Zimbabwe (IDCZ), business feels the institution remains undercapitalised and constrained by sanctions on Zimbabwe.
IDCZ is the industrialisation arm of the government and, according to the Industry and Commerce ministry, plays a strategic role as a development finance institution, including availing medium to long-term capital for industrial upgrading, modernisation, and innovation by companies in the manufacturing sector.
A recent report deliberated on in Cabinet last week said IDCZ assumed the lending role in 2019 with $24 million seed money and to date the revolving fund has grown to $2,2 billion.

“Additionally, over 2 000 new jobs have been directly created and a further 7 000 preserved across the benefiting sectors. Furthermore, IDCZ declared a dividend of $15 million and recently $300 million for the year 2021 to government,” the report said.
The Zimbabwe National Chamber of Commerce (ZNCC) applauded the decision to give IDCZ the lending role, which ZNCC chief executive Chris Mugaga said was one of the business lobby group’s recent resolutions.
“One of our resolutions as the ZNCC was for IDCZ to be made a development finance institution as opposed to a conventional bank.
“Conventional banks in Zimbabwe are offering vanilla products or they are operating what we call the vanilla banking model where everything they issue out, in particular their advances or loans, is based on collateral.
“There is no creativity in their business model. So, our push has always been for IDCZ to be a developmental finance institution taking the structure of IDC (Industrial Development Corporation) in South Africa… developmental finance, in particular, to try to revive and retool industry,” Mugaga told The Financial Gazette this week.
He said more still needed to be done in addition to the funds that have been extended by IDCZ so far.
“The funding that came through IDCZ… it was not as effective as it could be. One of the reasons why IDCZ in its current state and will not play a key role is that it is heavily undercapitalised.
“So, if it is undercapitalised it means its ability to underwrite, especially advances to the private sector, will be limited,” Mugaga said.
He added that it was important to note that IDCZ remained on the list of entities sanctioned by the United States of America under the Zimbabwe Democracy and Economic Recovery Act.
This, the ZNCC, which recently undertook to lobby for the removal of sanctions, believes is a huge constraint on IDCZ’s mandate to mobilise developmental finance.
“IDCZ, just like the Infrastructure Development Bank of Zimbabwe (IDBZ), has been under sanctions. The reason why the government has been spending so much money supporting contractors in road construction is that IDBZ, which is supposed to play that role, has been under sanctions and it cannot mobilise resources or capital.
“So that is evidence that with sanctions it is difficult for them to have legroom to impact the economy, especially on the private sector and IDCZ is not spared from the same challenges which IDBZ has faced,” Mugaga added.
“In its current state, it (IDCZ) will remain a very, very restricted or disabled institution. They need capitalisation.
“Without capitalisation, it will be very difficult for it to play the role (of a development finance institution).”
newsdesk@fingaz.co.zw