IDC transformation requires $100 million

IDC transformation requires $100 million
RBZ Governor John Manguda

RBZ Governor John Manguda

THE conversion of the Industrial Development Corporation (IDC) into a development finance institution, which requires a $100 million capital injection, could be imperilled by lack of financial support from sole shareholder, government.
IDC has had successive rights issue calls of a total of $83 million to address its technical insolvency, made since 2013, have been ignored.
Similarly, the Ministry of Industry and Commerce’s bid for a $100 million revolving fund as seed capital to resuscitate the manufacturing sector through the IDC’s DFI function has, to date, failed to find budgetary support.
Central bank governor John Mangudya (pictured), in his mid-term monetary policy statement last month, identified the transformation of the IDC as one of 12 priority policy areas for government as it bids to address sagging investor confidence, the shortage of foreign exchange and a yawning trade gap, among other issues.
Industry Minister Mike Bimha, under whose purview IDC currently falls, said in early August Cabinet had approved plans for the entity to fund manufacturers.
The IDC, which is wholly-owned by the State, is a conglomerate with several business units in different sectors of the economy.
In a statement accompanying financial results for the year to December 31, 2016, the IDC said: “The resuscitation of the development finance function remains a challenge as no provision was made for seed capital for start-up.”
But it said it was in discussion with government for funding amounting to $83 million to mitigate the group’s “technical insolvency”.
The financial statements show that the group’s current liabilities exceeded current assets by $37,1 million. Current assets stood at $60,4 million during the period under review, from$65,6 million in the previous year, while current liabilities were $97,5 million, down from$140,4 million in the previous year.
The IDC’s original mandate involved spearheading the creation of new enterprises and the rehabilitation of struggling firms but it later became more of a management services holding entity after the formation of Zimbabwe Development Bank (ZDB) and the Small Enterprise Development Corporation (Sedco) in the 80s.
The IDC, which was last year removed from the Office of Foreign Assets of United States Department of Treasury’s sanctions list, controls more than 15 companies with interests across different industrial sectors.
It has a controlling stake in Willowvale Mazda Motor Industries, Deven, and Amtec.
The company also has a 17,62 percent shareholding in Modzone Enterprises and also partnered the Chinese in cement manufacturing and runs a real estate business unit, Sunway City.
It is also joined hands with Indians in the agro processing firm, Surface Investments.
The group posted a profit of $7,7 million during the year to December 31, 2016, from an $8,2 million loss reported in the previous year.
The profit for IDC, once one of only a few State-owned firms that consistently declared dividends since independence in 1980 until its operations were hit by sanctions and an economic crisis that ended with dollarisation in 2009, was attributed to a gain of $21,6 million from loss of control of Zimglass Industries, which was put into liquidation last year.
This means that the profit is not indicative of the group’s performance from the ordinary course of business.
Revenue for the group went down $74,8 million during the period under review, from $93,8 million recorded in the previous year.
The IDC attributed this to low fertiliser and other group products sales, reduction in commodity prices on the international market, persistent liquidity constraints, low capacity utilisation and down-scaled operations in the motor and transport sector.
Total assets went down to $193,4 million during the period under review, from $213,2 million recorded in the previous year.

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