Bulawayo: A case for a ‘dead’ city
…Could political bickering over a rescue package, have robbed Bulawayo
of the only chance it had to turn around its fortunes?
A GHOST-TOWN is hardly an apt description for Bulawayo’s industrial area.
It comes close enough though. The silence from factories in the country’s second largest city’s Belmont industrial area gives off the obvious sign that all is not well.
Occasionally, the Bulawayo Power Station, on the fringes of the city’s central business district, from time to time roars and puffs out huge columns of white smoke into the sky. Those instances are rare though.
And when the thermal power station stops running during its many frequent long shut downs, the familiar deadly silence returns to haunt the City of Kings, as Bulawayo has affectionately been known for many past generation.
But how did an entire city — of a population of over one million residents, after 36 years (a generation, in fact) of independence, collapse?
This city was the country’s undisputed industrial hub and the headquarters of once southern Africa’s biggest company in rail transportation, the National Railways of Zimbabwe.
At its peak, the city accounted for 75 percent of all the country’s manufacturing activities. But, sadly, in his inauguration speech, after winning the 2013 elections, President Robert Mugabe announced the death of Bulawayo. He simply described it as an “industrial scrap yard”.
Its present glaring stagnation, which continues to mesmerise both visitor and resident, can be traced back, like the origins of everything else that has gone wrong in this country, to 2000.
The death knell on Bulawayo’s demise was, however, finally sounded seven years ago when the southern African nation decided to ditch its Zimbabwe dollar currency after it had been battered by years of relentless hyperinflationary pressures.
The country’s February 2009 decision to trade its currency for a multi-currency regime brought with it the unintended consequences of the collapse of the country’s second city.
Companies based in Bulawayo simply failed to smoothly move over to the use of the greenback, at a time when the entire southern part of the country was intimately attached to the South African rand and, to a lesser extent, the Botswana pula.
While many of the general transactions were conducted in rands, workers were being paid US dollar salaries, overheads were recalculated to the new currency as company owners settled their obligations to service providers in US dollars. Thrust in-between the proverbial rock and a hard place, difficult choices stared back at companies. They either had to cut down on their workforces, pay lower salaries, sink deeper into debt, relocate to greener pastures, or simply shut down. The powerful US dollar simply proved very elusive for Bulawayo’s economy.
It was yet another proverbial case of “damned if you do and damned if you don’t”.
The Ministry of Industry and Commerce estimated that over 100 companies shut down and over 20 000 people had been thrown out of employment by 2011. David Whitehead, Merlin, Textile Mills and Archer Clothing were some of the big names on the casualty list. Compounding the collapse was the poor performance of parastatals headquartered in the city such as the National Railways of Zimbabwe and the Cold Storage Company (CSC) that anchor trusses of Bulawayo’s economy.
Hundreds more companies, in an effort to survive, relocated to Harare, the capital, where its bustling hive to activity offered a sliver of hope to weather the storm. Bulawayo had for the first time lost its status as the country’s “industrial hub”—a position it had prided itself since independence in 1980.
And so when the slide of Bulawayo’s industries began in earnest, soon after dollarisation, a plan was hatched, in October 2011, by the then power-sharing government led by President Mugabe and former prime minister Morgan Tsvangirai, to stop Bulawayo’s economic collapse. The Distressed and Marginalised Areas Fund (Dimaf) was launched in direct response to the industry bloodbath.
Backed by a US$40 million fund, Dimaf’s focus on Bulawayo was praised by economic observers for being an intervention that would help turn around the city’s fortunes.
Insurance giant, Old Mutual would provide US$20 million of the rescue fund and its subsidiary, the Central Africa Building Society (CABS) would administer it. The government was to chip in with the remainder of the balance. Dimaf’s terms of reference were straight-forward; struggling Bulawayo companies would be able to apply for funding to help retool their businesses. According to figures from CABS, 48 companies, about half of them from Bulawayo received loans from Dimaf since 2011.
The Deputy Minister of Industry and Commerce, Chiratidzo Mabuwa said the firms which had benefited from Dimaf especially those under judicial management had managed to grow the cake.
“The US$10m they were given has grown to US$28 million through a revolving fund. There is a lot of enthusiasm and if industries that benefited pay back the money the fund would stimulate increased growth,” she said.
Mabuwa also revealed that of the US$20 million, which was available when the facility was launched, only US$4,6 million is available for lending this year.
“… the amount that is available for lending in 2016 is US$4,6 million. A pipeline of projects worth US$4,2 million in application is under consideration for 2016. The major drawback has been failure to pay back the loans,” she said.
Mabuwa indicated that as part of conditions by government to ensure that future funds being disbursed, would see government seconding judicial managers to oversee turnaround strategies of the companies.
“We have scaled up a situation where we have engaged potential judicial managers to be sought by prospective companies that would want to benefit from the fund for them to be able to be able to repay the monies extended to them. We are not saying all the companies would be under judicial management, but we are going to introduce a concept whereby the companies invite experts to resuscitate their industries and then they qualify for those loans.”
Presenting the 2015 national budget, Finance Minister Patrick Chinamasa said 4 600 companies shut down between 2011 and 2014 causing 54 000 job losses countrywide.
While Mabuwa and others in government may be optimistic, many, however, are doubtful that Dimaf still has any life in it after it failed to take off as initially envisaged. Many believe its challenges were mainly political than economic.
The different political players, ZANU-PF and the two Movement for Democratic Change parties in the inclusive government that ran the country between 2009 and 2012, all seemed to have had an eye of pushing through the economic programme for Bulawayo’s revival, with separate ulterior motives of scoring political points. It appears that political bickering and interests may have assuaged over the city’s economic interests. The stand-off of who would enjoy the limelight of Dimaf still haunts the city to this day and has left it no better than it was nearly five years ago.
Welshman Ncube, who was the minister of industry and commerce at the time of Dimaf’s launch, still believes that the rescue fund was the perfect answer to the de-industrialisation scourge of Bulawayo.
“That policy remains the best policy for government to put its money where its mouth is because once industry is revived, not only do workers get their jobs back, there is more economic activity…,” he said.
So is there now political will to change Bulawayo’s situation—given the increased commentary about Bulawayo’s sorry state from the ruling ZANU-PF party leadership?
“What’s wrong? What is it that we can do? CSC was once our pride and is collapsing. How can we bring it back? Industry has closed; there are now churches there. How best can we bring them back?
“Our roads here in Bulawayo are in a very sorry state, there are potholes all over,” Vice President Phelekezela Mphoko laboured over the state of Bulawayo during a business conference held in Bulawayo last month.
“The conference had been arranged to try and tackle the issues of economic growth in the city.
Economic observers point out that unlocking fresh capital for the city is another thing altogether, which is tainted by the unfavourable economic environment in the country. Economic growth for the country this year is projected at 1,7 percent according to Treasury. This estimate is a revision of earlier projections of over two percent. Poor commodity prices and the disappearing US dollar that has triggered serious cash shortages in banks mean more challenges for any revival plans for the city.
Media reports suggest that a second phase of Dimaf is being mooted. Would it work?
Industrialists have their reservations and point out that government already has its hands full as it tries to make its three-year-old economic blueprint, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-Asset), work. Zim-Asset needs US$27 billion in funding for full implementation.
Zimbabwe National Chamber of Commerce president, Davison Norupiri, said the issue of extending a hand to distressed companies a second time around remained problematic. It was much better to cut losses than cry over spilt milk.
“There are some which we must let go because there is no way that they can still be rehabilitated. They have old machinery and are in debt and have been overtaken by the emerging economy. Simply put, some companies are not revivable,” Norupiri told the Financial Gazette in an interview.
“Instead, let us avail funding to those which are operational and increase their capacity. For those which are operating at either 30 or 35 percent there is more hope, and even those at 80 percent… than for those which are deep into debt. Putting money there is the same as putting it into a bottomless pit and it will take longer before we can extract any value from them,” he added.
Dimaf may have come and gone, but Bulawayo’s ongoing economic devastation will be an indictment on political leaders for years to come. —
Follow us on Twitter @FingazLive and on Facebook – The Financial Gazette