Business frets over economy

LIVINGSTONE MARUFU

 Local businesses are fretting over a ‘poisoned economic and political environment’ which threatens Zimbabwe’s ability to benefit from the African Continental Free Trade Area (AfCFTA), Business Times can report.

Zimbabwe is one of 54 countries that signed the AfCFTA agreement which creates the biggest trading bloc in the world with a population of 1.2bn and a combined GDP of US$3.4 trillion.

ZNCC CEO ,Christopher Mugaga

Zimbabwe National Chamber of Commerce CEO Christopher Mugaga said the ‘poisoned’ environment has the potential to put local companies at a disadvantage adding that the government needs to make drastic reforms, including dumping economic policies that are unpalatable to foreign investors, which will put business on the road to recovery.

“We want the government to hasten all forms of reforms, be it political or economic, to enjoy this party brought in by the AfCFTA before it’s over,” Mugaga said.

 “If we fail to reform we will remain a super till or supermarket economy where you have the high propensity to import rather than export. This will encourage more countries to dump cheap goods into our country.”

Mugaga said the political arena was poisoned and does not encourage productivity as there are a lot of inconsistencies in the country’s policies.

Zimbabwe’s political landscape has remained highly polarised with the country’s two biggest political parties ZANU-PF and MDC-A locked in an impasse over a possible dialogue to resolve the political crisis.

On the economic front, Zimbabwe is struggling to extricate itself from economic woes and requires much foreign direct investment, to repair the damage.

Zimbabwe has been battling to access capital, which  has weighed down corporations.

Several potential investors are shying away from the country partly due to the intolerable politics and inconsistent policies.

Mugaga said the foreign currency auction system should be reformed to ensure that the processes are not manipulated.

He also recommended the government to amend the various Statutory Instruments so that they become investor friendly.

A number of listed companies that have recently announced their financial reports for the period ending March 31, 2021, bemoaned various challenges.

Most companies that recently published their financial results reported modest growth in performance and have projected a lukewarm 2021 on account of mounting economic pressures.

Zimbabwe has been hard hit by an economic crisis, which has led to company closures, downsizing and retrenchments.

Last week, Zimbabwe’s largest brewer, Delta Corporation, said there were growing concerns over policy inconsistency and currency volatility which have affected its operations.

“The board is concerned about the unstable operating environment as indicated by hyperinflation, frequent changes to the policy environment, a weak local currency and the existence of multiple and disparate exchange rates,” Delta chairman Canaan Dube said adding: “Consumer disposable incomes were further eroded by high inflation and low pay increases.”

Fidelity Life Assurance of Zimbabwe board chairman, Fungayi Ruwende, said the life assurer had been affected by the Covid-19 pandemic and the rapid deterioration of the local currency and high inflation. 

“The official foreign currency exchange platform became dysfunctional and the economy defaulted to the parallel exchange rate for the pricing of goods and services. High inflation posed a danger to the relevance of insurance products as it rekindled the sad memories of the devastating loss of value that was suffered in the period preceding the adoption of the multiple currency regime in 2009,” Ruwende said.

Foreign Affairs and International Trade deputy minister, David Musabayana, said the AfCFTA has made some trade remedies which can be employed in response to market distortions brought about by trade.

Musabayana said there are exceptions to the general objective of trade liberalisation.

“One major feature in trade agreements being negotiated around the world is trade liberalisation. However, this may lead to market distortions giving rise to unfair trade practices.” he said.

“In this instance, state parties are allowed to take action against such imports to remedy any negative effects emanating therefrom. This action is what is referred to as ‘Trade Remedies’.”

The AfCFTA makes provision for trade remedies in response to injury, serious injury or threat thereof emanating from trade.

All the 55 countries except Eritrea have signed the AfCFTA agreement.

The agreement establishing the AfCFTA was signed in Kigali, Rwanda on March 21 2018 and became effective on March 30, 2019. Trading commenced on January 1, 2021

Analysts urged the local companies to manufacture quality  goods to compete at the high level to earn more foreign currency.

All institutions with a stake in the agenda to facilitate trade in Zimbabwe are expected to participate in AfCFTA.

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