Dollarization and the problems affecting Zimbabwean industries

Dollarization has brought some benefits and challenges to Zimbabwe. For benefits, obviously some stability in the macroeconomic environment in terms of price stability has ensured that there are significant household and national incomes. As a result the standards of living have improved considerably. In the absence of significant government expenditure, external inflows are sustaining some economic activity to a respectable level.

But the manufaturing industry has not fared as expected. My only problem in this regard has been the misdiagnosis by the policy-makers and "major" players in the Zimbabwean economic playing field on what really is the problem. The low capacity utilization has been attributed by them to a liquidity crisis in the local financial markets. Of course, a liquidity crisis is evident in our economy, but in an effort to arrest the local performance of our local firms, liquidity is actually a derived problem from the actual one which needs attention. Credit risk is actually the primary problem which needs proper attention. After years on the sidelines our local companies, in my opinion, haven't quite discovered the formulae to be competitive and profitable. Some are actually into huge debts they are struggling to pay, a few years after dollarization. The reasons they give such as the high interest rates and maturities of the loans are exactly the symptoms of a crisis as a result of credit risk. The sooner they understand this the better the problems in the manufacturing industries are fully appreciated.