ECONOMIC experts have bemoaned the country’s limited lending to key economic sectors amid calls for financial institutions to prioritise broad manufacturing sectors if tangible economic growth is to be realised.
The remarks come against a background where the Reserve Bank of Zimbabwe (RBZ) monthly economic review for August 2021 reported that credit to the private sector was mainly extended towards agriculture, 30.20%; households 20%; distribution 11.48%; financial organisations 10.82%; manufacturing 9.85%; and services 8.43%.
Economist Tawanda Prazeni said the level of credit being extended to the manufacturing sector is low, arguing that such thresholds will do little to restore the much-needed productivity. “With just 9.85 % awarded to the manufacturing sector, such allocation is a paltry amount for an economy which gives an impression of wanting to steer economic growth.
Agriculture should be complemented by manufacturing because that is where value addition takes place. “Exporting our farm produce raw limits our export earnings. More still needs to be done to capacitate the manufacturing sector,” he said.
Purazeni suggested that more manufacturing sector-targeted credit lines need to be opened, with relaxed lending terms and conditions alongside affordable interest rates. He said such measures need to be reinforced by a savings culture for onward transmission of such funds towards loans for productivity.
“However, these are only immediate and short-term measures, the only thing which can take this country from the economic abyss is improving the investment environment which will resultantly bring in the much-needed FDI,” Purazeni added.
Zimbabwe ranks lowly on competitiveness rankings, placed 127th out of 141 countries of the world in the 2019 Global Competitiveness Report. Similarly, the country has not done so well on the World Bank’s Ease of Doing Business Index.
Several policies to revamp the growth of the sector have since been enacted, but market watchers argue that their impact will be very minimal outside clear and flexible lending mechanisms. Yona Menon, an analyst at Ethos Capital, also echoed similar sentiments, maintaining that more credit should be channeled towards revamping the country’s productive sectors.
“I think, ideally it would be encouraging to see more credit being extended to the productive sectors of agriculture and manufacturing. Like the agro-processing sector because it’s a sector which can play a role in creating strong value chain links that can, in turn, support agricultural development,” he said. — STAFF WRITER.
