By Golden Sibanda

GOVERNEMNT is finalising modalities for the disbursement of US$500 million working capital facility earmarked for industry to raise productivity amid a chronic liquidity crunch sweeping across the economy.

Industry and Commerce Minister Welshman Ncube said his ministry had completed the preliminary framework on the modalities for the disbursement, but this would be discussed further with the Finance Ministry.

Minister Ncube said this when he met the local business community yesterday to exchange views on the various issues affecting industry and the country’s economy.

"There has been the issue of liquidity in the economy. That has particularly been a very difficult area and as Government we are still working on addressing the problem," he said.

"Government has set aside US$500 million to be accessed by businesses and the Ministry of Industry and Commerce has been working modalities of accessing that money."

The facility, which would be availed in the next few weeks comes at a time when capacity utilisation, which recovered to an average 32 percent as of October last year, has started falling again in some cases.

The funds, which will also benefit small rural businesses, would be accessible through local banks at an interest rate lower than all market rates.

The facility is a mixture of Special Drawing Rights funds, under Zimbabwe’s US$510 million allocation by the International Monetary Fund, and funds from the fiscus allocated to the industry under the 2010 National Budget.

Most companies in all sectors need to raise production. Lack of working capital is threatening to reverse the significant recovery in industrial capacity recorded last year.

Confederation of Zimbabwe Industries president Mr Kumbirai Katsande said industrial capacity utilisation had reached a level beyond which it would not pass without significant fresh capital injection, which has been elusive.

He said there was need for huge external funding to ensure the improved capacity utilisation achieved last year does not reverse as is already happening in some areas.

Industrial capacity utilisation fell to its lowest in 2008 after a decade long economic meltdown that resulted in hyperinflation and closure of some businesses.

In many instances capacity utilisation fell to levels well below 10 percent, which resulted in local retail outlets running dry and the majority of products that were being sold in Zimbabwe were imported from neighbouring countries.

However, the situation changed last year after the Government adopted the multi-currency system, which resulted in an overnight drop of inflation to sub-zero levels.

However, the changeover to multi-currency resulted in serious liquidity constraints, as the amount of liquid cash circulating in the economy was not sufficient to meet the financial obligations of the recovering economy.

The banking sector currently has limited capacity to extend affordable long-term loans due to the nature of deposits being received, mostly short term.

Deposits into banks rose to US$1.2 billion by December last year from about US$300 million at the beginning of the year, but this is a far cry from the more than US$8 billion to reconstruct the badly bruised economy.

Meanwhile, Minister Ncube said Government has identified parastatals and state enterprises set for restructuring, commercialisation and privatisation.

The list of the various companies targeted under this initiative would soon be presented to the Cabinet for consideration and the process is work in progress.

Government intends to offload loss making and poorly performing parastatals and state enterprises, some of which relied on Government handouts for a very long time despite being key enablers of economic growth.

He said 16 State entities would be restructured, while 16 would be commercialised and about 14 would be privatised, which would see some of the companies listing on the Zimbabwe Stock Exchange in the near future.

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