Home » General » DEBT OWED BY ZIMBABWE GOVT TO LOCAL FIRMS CHOKING THESE COMPANIES

HARARE, March 10 — Debts which the Zimbabwe government owes some local companies for goods and services is seriously impacting their viability, says Industry and Commerce Minister Mike Bimha.

The government owes various companies, including seed and fertilizer manufacturers, millions of US dollars for goods and services. By November last year, the amount owed stood at 1.1 billion USD while the government also owed multilateral lenders an estimated 10 billion USD.

Bimha told officers attending the Joint Command and Staff Course at the Zimbabwe Staff College here Monday that the government should honor its obligations to local firms since it was a major player in procurement.

“A number of local companies are owed to a large extent by government departments, causing great distress and viability problems,” he said. “Since the government is a major player, the accumulation of domestic arrears is also creating gridlocks in the national payment process with a knock-on-effect on the movement of money in the economy. This is worsening the liquidity situation for the productive sector.”

Bimha said many local companies were failing to secure funding to retool and boost production as most loan facilities available were expensive and of a short term nature. The current liquidity crunch had resulted in an increasingly difficult trading environment putting businesses under increasing stress, he said.

Bimha added that there was an urgent need to put in place measures that promoted internal circulation of money to assist struggling firms secure funds for recapitalization. “The majority of distressed companies are over borrowed and in debt and will have registered first mortgage bonds over their assets in favor of the first lender,” he said.

“In seeking second tranche loans to extricate themselves from distress, they will often be required to register second mortgage bonds on the same assets, but because of declining asset values, second mortgage bonds will have negligible surrender value so the second banks will not be willing to lend.”

SOURCE: NEW ZIANA

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