CEOs warn of industrial meltdown

LIVINGSTONE MARUFU

Business leaders have raised alarm over the escalating carnage in Zimbabwe’s industry, citing mass business closures, rising unemployment and shrinking commercial spaces.

Captains of industry blame government policies, erratic politics and deepening  economic instability for the crisis, warning that without urgent intervention, the formal sector could collapse under mounting pressure.

They point to excessive  taxation, exchange rate volatility, relentless power cuts and  the  accelerating  shift to the informal sector as key drivers of the turmoil.

A major concern is the Zimbabwe Gold (ZiG0 currency, introduced in April last year, which continues to struggle due to weak confidence- ironically even the government, its creator, has not fully embraced it.

A survey conducted by Business Times , a market leader in business, financial and economic reportage, revealed a staggering 35% premium on goods, forcing consumers to turn to informal traders for more affordable options.

At the CEO Africa Roundtable breakfast meeting,held in the capital Harare, Chairman Oswell Binha voiced alarm over the perilous state of the business sector, stating,

“These massive losses have brought us to the brink of collapse.”

Binha emphasized the urgency of the moment:

“As business leaders, policymakers, and key stakeholders in Zimbabwe’s economic landscape, we gather at a time of unprecedented chaos. The carnage affecting businesses, the rapid growth of the informal sector, and the alarming rise in poverty levels require us to confront the pressing issues hindering economic progress: mismanaged exchange rates, misguided de-dollarization policies, excessive taxation, instability of the ZiG, escalating public debt, infrastructural deficits, and a lack of cohesive policy.”

He lamented that these challenges are not mere theoretical concerns, they directly impact businesses and livelihoods on a daily basis.

“We are grappling with an unstable currency, a widening exchange rate premium now exceeding 50%, rampant inflation, and a 70% increase in informal activities, all exacerbated by infrastructure bottlenecks that stifle productivity and competitiveness. For many businesses, long-term planning has become nearly impossible as policies shift unpredictably, often without adequate consultation.”

Binha warned, “Let us be clear: these are not just problems to analyze, they are challenges that demand solutions. Given the current trajectory, I doubt we will achieve the projected 6% growth rate by 2025.”

According to the Reserve Bank of Zimbabwe, approximately US$2.5bn circulates within the informal sector, underscoring the magnitude of the issue.

Ken Sharpe, the CEO of WestProp Holdings Limited, raised concerns about the financial impact of the ZiG. “We estimate that US$600m has been extracted from this economy to support the ZiG. This amount could significantly bolster the productive sector if redirected.”

Sharpe urged the government to consider implementing a simplified taxation structure. He suggested adopting a single tax rate of 25% to streamline the process.

In a similar vein, Busisa Moyo, Chairman of the Zimbabwe Investment and Development Agency (ZIDA), pointed out the country’s low production levels and their adverse effects on economic stability.

“We may believe we are productive, but the reality paints a different picture. Our agricultural and mining sectors, despite their potential, are underperforming. Confidence in the economy is crucial, without it, there is little incentive to engage in production.”

Moyo noted a troubling trend among corporations: “Businesses are scaling back on capital expenditures necessary for expansion and maintenance. Some sectors, particularly retail, are experiencing a contraction, leading to shop closures.” He attributed this downturn to the influx of players in the market, drawn by the initial attractiveness of opportunities, only to be met with the challenges posed by rampant informalization.

The multiple exchange rates currently in circulation complicate the situation further, undermining the viability of the formal sector.

“With different rates at play—one at ZWG37: US$1, another at ZWG32:US$1, and yet another at an implied price of ZWG31:US$1—businesses are unable to operate effectively. It’s difficult to innovate when faced with such disparities,” Moyo explained.

In defense of the government’s actions, the Reserve Bank of Zimbabwe contended that the challenges facing businesses are a result of poor corporate governance rather than systemic economic issues. Dr. Innocent Matshe, the central bank’s deputy governor, stated, “Crisis? What crisis? We are transitioning towards normalcy. If businesses continue to operate under outdated models, they will inevitably struggle.”

Matshe advised companies to adapt to the current environment, saying, “When faced with challenges, businesses must reassess their strategies. If you encounter a crisis, it’s essential to either revise your business model or exit the market. It’s easier to blame external factors than to acknowledge internal shortcomings.”

He further criticized the reliance on a multi-currency system, stating, “This practice impedes the effectiveness of our Monetary Policy Statement. When a country is dollarized, it essentially imports monetary policies from elsewhere, limiting its control over local economic conditions. A local currency is essential for competitiveness; one cannot expect to thrive using US dollars in Zimbabwe.”

The carnage afflicting Zimbabwean businesses demands urgent attention and reform, the business leaders said. The current economic climate, characterized by erratic policies and a lack of confidence, requires decisive action from both the government and the private sector. Business leaders have articulated a clear message, without coherent strategies and a commitment to addressing these critical issues, the path forward remains perilous.

As stakeholders in this economic landscape, it is imperative to foster an environment conducive to growth, innovation, and sustainable development. The time for complacency has passed, immediate action is essential to avert further decline and to ensure a more stable and prosperous future for Zimbabwe.