Wattle decries lack of cheap, long term working capital

16 Sep, 2022 - 00:09 0 Views
Wattle decries lack of cheap,  long term working capital

eBusiness Weekly

Michael Tome

THE Wattle Company says lack of cheap and long-term working capital from local financiers is choking the sustenance of its operations, as the forestry industry requires lengthy periods to realise returns.

The Manicaland-based company is involved in complex operations which comprise the use of numerous consumables that require constant funding before the company gets to its marketing period.

For instance, the firm uses circa 80 000 litres of fuel and electricity worth US$150 000 per month as some of the consumables required for day to day operations.

Critically, some of the forests need as much as six to 20 years to mature thus the need for working capital in the period in between.

The firm indicated that the forestry industry was capital intensive, and thus the need for constant support from local financiers for guaranteed continuity.

Operations according to the Wattle Company are also being hampered by local banks’ high cost of finance which the company said is a deterrent to borrowing working capital.

This comes as the company is facing a booming timber business locally as demand for roofing timber continues to outstrip supply, a position that has led the company to halt timber exports.

In an interview on the sidelines of the just-ended Confederation of Zimbabwe Industries (CZI) conference, The Wattle Company’ general manager for marketing and retail operations, Dr Sam Gwatura, said local banks should devise mechanisms to support industries that require long-term capital at reasonable terms.

“Currently the macroeconomic position is not allowing us to have easy access to funding for working capital and retooling, we work in a high Capex area where a tractor lasts for four months and you want a brand new one.

“Some local financiers are not able to meet our capital requirements and the money is expensive, and it being short term too when you want to grow a 25-year tree and someone is giving you two years, it means you need to pay the money before the trees reach the maturity,” said Gwatura.

“So forestry industry requires long-term financiers that give a tenure of 5-10 years, we normally need working capital, in essence, we require money because some of our machines are expensive like when we talk of our biggest machine the ESKIDA costs about US$1,1 million, that is before we include  tractors  and lorries.”

The Wattle Company Limited is the only wattle extract producer in Zimbabwe with a capacity to produce 6 000 tonnes per annum while exporting 99 percent of its product to Asia while the remainder is sold locally.

It is also a major supplier of creosote-treated transmission poles, telephone poles, fencing poles, and droppers which are marketed and sold to major utility companies that include Nampower of Namibia, Zambia electricity supply company, Electricidade de Moçambique(EDM), and throughout the SADC region to as far north as Kenya.

The company also exports veneer to India, China, Turkey, and the United States of America which they then develop into boards used for home construction.

Countries like Botswana are supplied with fencing poles for their livestock, and timber to Zambia.

Share This:

Sponsored Links