Adios to tough 2024

PHILLIMON MHLANGA

As 2024 draws to a close, businesses are eager to bid farewell to a year marked by adversity and unpredictability.

Rising operating costs, market volatility, relentless tax disputes, a persistently unstable currency, deteriorating macroeconomic conditions, and policy uncertainty have combined to make the past 12 months a challenging test of endurance for many.

These turbulent times have underscored deep-seated economic, fiscal, and monetary challenges.

One of the primary concerns for businesses has been Zimbabwe’s ongoing currency instability.

The Zimbabwean dollar has faced continuous depreciation, undermining its purchasing power and eroding confidence among both domestic and international stakeholders.

This volatility has made long-term planning nearly impossible, with businesses forced to constantly adjust prices and operations in response to exchange rate fluctuations. The parallel market for foreign currency continues to dominate, often dictating market dynamics despite government interventions.

Tax policies have only added to the burden.

The Zimbabwe Revenue Authority (ZIMRA) has ramped up tax collection efforts in an attempt to bolster government revenues, but this has come at a significant cost to businesses.

Many firms have faced hefty assessments, disputes over back taxes, and confusion regarding compliance requirements. A high tax regime, compounded by competition from the informal sector, has placed formal businesses in a precarious position, often operating on razor-thin margins.

Inflation has further exacerbated operational challenges. While authorities report some improvement in inflation figures, the cost of goods and services continues to rise sharply. Businesses are struggling to balance increased input costs with stagnant or declining consumer purchasing power. This inflationary environment has also driven up the cost of borrowing, leaving many enterprises unable to access affordable credit to sustain or grow their operations.

Policy inconsistency remains a significant deterrent to investment. Measures such as abrupt changes to exchange controls, import restrictions, and ad hoc regulations have unsettled investors, both local and international. Despite government assurances of reforms, tangible progress has been limited, leaving businesses skeptical of promises of economic stabilization.

Moreover, power outages, infrastructure deficiencies, and limited access to key resources like fuel and water have further strained the operating environment.

Businesses have been forced to invest in costly alternatives, such as generators and private water supplies, further increasing operational expenses.

From conglomerates like Innscor and Delta Corporation to retail chains such as OK Zimbabwe and TM Pick n Pay Supermarkets, the nation’s corporate players have faced immense difficulties that threaten their sustainability.

Taxation emerged as a central challenge this year, with notable cases involving Innscor Africa Limited and Delta Corporation and many others.

 Both companies were locked in fierce disputes with ZIMRA over unclear and retrospective tax assessments.

“The tax system remains riddled with inconsistencies that discourage investment,” said the Confederation of Zimbabwe Industries (CZI), the country’s largest business lobby group.

Innscor’s Chairman, Addington Chinake, also called for immediate reforms to eliminate legal loopholes that unfairly burden corporations.

Delta Corporation, Zimbabwe’s largest brewer, reported similar struggles.

“It’s impossible to operate sustainably when you are constantly under threat of arbitrary tax adjustments,” remarked Delta’s CEO, Matts Valela.

The company’s ongoing legal battles with ZIMRA have drained both resources and morale, symbolizing a broader issue impacting the business ecosystem.

The Zimbabwe National Chamber of Commerce (ZNCC) also voiced concerns over the lack of transparency in the tax system.

“Businesses need predictability and fairness in taxation to thrive. The current scenario forces many companies into financial distress,” said ZNCC.

Meanwhile, Zimbabwe’s currency challenges persisted throughout the year. The government’s introduction of a gold-backed currency, the ZiG, was intended to stabilize the economy but failed to meet its objectives. By the end of 2024, the ZiG had depreciated by over 40%.

The Retailers Association of Zimbabwe (RAZ), which represents major retailers including OK Zimbabwe, TM Pick n Pay, and Edgars, warned of potential store closures as formal retailers struggled to compete with informal traders pricing goods based on black market rates.

“We are caught in an impossible position. The situation is clearly untenable and will lead to company closures if authorities do not intervene with policy measures to protect the formal retail sector,” RAZ said in a letter to the Ministry of Finance, Economic Development, and Investment Promotion.

Retailers like OK Zimbabwe and TM Supermarkets reported significant losses in market share, highlighting the ripple effect of exchange rate distortions.

Informal traders, on the other hand, continued to thrive by selling imported goods at competitive rates, bypassing formal systems. This discrepancy has destabilized the formal retail sector, prompting calls for immediate monetary policy adjustments.

The Confederation of Zimbabwe Retailers (CZR) added to the growing concern.

“We have witnessed a year of stagnation, and recovery seems far off without substantial structural reforms,” said CZR president Denford Mutashu.

Amid the gloom, various business advocacy groups have called for decisive reforms.

The CZI has pushed for tax policy reviews to eliminate ambiguities and promote investor confidence. “Zimbabwe’s potential remains immense, but it cannot be realized under the current regulatory environment,” emphasized CZI.

The ZNCC echoed these sentiments, advocating for currency stabilization measures and incentives to support formal businesses.

 “We need a bold, cohesive economic policy that prioritizes both growth and inclusivity,” said ZNCC.

Despite the challenges, there is cautious optimism for 2025. Government projections suggest a potential 6% economic rebound, spurred by anticipated improvements in agriculture and the energy sector. Initiatives to restructure Zimbabwe’s external debt and re-enter global financial markets also offer a glimmer of hope.

However, stakeholders warn that such growth will remain elusive without substantial reforms in taxation, currency management, and business regulation.

“2025 must be the year Zimbabwe addresses its structural weaknesses,” said CZI, adding, “The cost of inaction is far too great.”

For Zimbabwe’s business community, 2024 has been a year of relentless struggle, marked by financial uncertainty, operational hurdles, and regulatory challenges.

As companies fight to stay afloat, the nation faces a critical juncture. The lessons of this year underscore the urgent need for reforms to foster stability and unlock Zimbabwe’s economic potential.

Whether 2025 will bring a turnaround remains to be seen, but one thing is clear, the resilience of Zimbabwe’s businesses has been tested like never before.