The Zimbabwe Economic Policy Analysis Research Unit (Zeparu) says the country’s engineering and metals industry requires at least $14.5-billion to get back on track and start to meaningfully contribute to the economy.

Zeparu surveyed 94 companies to gauge their operational status and readiness to comply with government’s stringent beneficiation requirements, most of which are due to take effect in December.

Besides others, Zeparu found that most of the companies were struggling with capacity use, which averages 28%. The companies are unable to secure long-term funding for the revival of basic operations.

“The annual operational requirements, according to the respondents, average about $240 000, with an annual total requirement of about $660 000. “About 85% of the respondents indicated that their capital requirements were financed from within the company, while 15% indicated shareholders as the source of funds,” the report says.

Most of the companies also revealed that they were discouraged from seeking loans from financial institutions because of high lending rates and collateral demands. “This parameter shows the difficulty that stakeholders in this sector are facing in terms of getting funding from banks and related financial institutions. None of the respondents have any loan with any lender or other sources.”

Zeparu says the sector has the potential to contribute at least $800-million annually in revenue earnings and create employment, while making significant contributions to the country’s gross domestic product.

“The engineering and metals sector could become the backbone of the Zimbabwe economy if was supported by export-orientated policies and adequate financial mechanisms. “A combination of sound policies, the injection of funds for recapitalisation and a sound business operating environment will be prerequisites for the revival of the engineering and metals sector,” the report says.

The study found that the sector was generally uncompetitive by global standards and had suffered an overall trade deficit of $3.3-billion during the period 2008 to 2012.

“The trade figures show that the engineering sector has almost collapsed, while the primary production is flourishing. “The resuscitation of the engineering sector as well as export-led industrial growth to maximise value addition and beneficiation and a turnaround in the trade deficit must be done urgently.”

The study also found that the operating environment remained unconducive for the revival of the engineering sector as the flooding of cheap imported products continued to choke local productivity.

“The operating environment is very tough for the players, with the main problems being working capital constraints, political instability, a lack of financing mechanisms, antiquated machinery, corruption, low demand on the market, high production costs, stiff competition from imports and labour issues, besides others.

The iron and steel, platinum-group metals, chrome, automotive and foundry industries were identified as the most strategic subsectors with the greatest potential to lead the revival and sustainable growth of the engineering and metals industry in Zimbabwe.