Dark cloud hangs over business

RYAN CHIGOCHE

The outlook for business is bleak, depressed by worsening economic conditions with captains of industry warning of bankruptcy.

The bleak future comes despite last year’s promise of stability.

Local companies are confronted with a plethora of challenges, including crippling power cuts,  foreign currency shortages, weak sales trends, price instability in the goods market as well as service market and policy inconsistencies, high cost of production, and competition from cheap imports,  among other challenges. At the same time, captains of industry said companies have not been able to access cheap loans as lenders  are reluctant to arrange borrowing.

The clouds hovering  over business  got the attention of the government with Reserve Bank of Zimbabwe governor, John Mangudya, summoning business leaders  to deliberate on how to stabilise the situation.

Captains of industry say one of the biggest problems confronting industry is the currency and price volatility. The Zimbabwe dollar has lost about 90% of its value against the United State dollar in the past few months. This week the Zimbabwe dollar was trading at ZWL$240: US$1 on the parallel market and ZWL$112:US$1 on the formal market.

Businesses, however, track the parallel market exchange rate when pricing their goods and services.

“…We are battling with currency volatility, the foreign currency  availability, electricity cuts, and also issues of certain key infrastructure,  water availability for industrial activity, roads, poor railway tracks . All these problems are still with us. Quite a number of issues are still not yet right,” the Confederation of Zimbabwe Industries (CZI), Kurai Matsheza told Business Times.

According to renowned economist, Steve Hanke, a professor at John Hopkins University, who track a basket of currencies around the world,  the Zimbabwe dollar, is the second  worst currency in the world after the Venezuelan  Bolivar, which takes the first prize  in a basket of junk currencies that have depreciated  by  98.97% against the  greenback  over the last few months to 4 920 000:US$1.

The other junk currencies are the Lebanese pound, the Sudan pound, Syrian pound, Argentine Peso, Turkish Lira, Iranian Rial, Nigerian Naira, Ethiopian Birr, the South Sudan pound, the Brazilian Real and the  Afghan Afghani, among others.

Matsheza said certain fundamentals have got to be right  in the economy to drive capacity utilisation.

On this year’s projections, Matsheza said the acute shortage of forex, power blackouts among other problems should be fixed for industry to increase its capacity utilisation.

He said the CZI will in February unveil its state of the manufacturing sector survey report which will indicate milestones achieved and challenges  encountered.

The sector had targeted capacity utilisation to reach 61% at the end of 2021, which was an improvement from 47% achieved in 2020 and 36.5% in 2019.

The Zimbabwe National Chamber of Commerce CEO Christopher Mugaga said there are a glut of problems which need to be solved for real industrialisation to take place.

“Zimbabwe is grappling with a volatile environment and inflation for many years now and there is an urgent need to put a lid to that so that cost of production can be contained and there is a need to deal with inflation to attract investors,” Mugaga said.

He said industry continues to face unfair competition from imports that are dumped especially in the textile industry and  food stuff.

He said: We want the government to be more strict on dumped goods to protect local industry. The country still has obsolete  machinery which was used in the 1950s and the machines are always down most of the time and are inefficient hence as long  as we don’t invest in machinery we remain uncompetitive as a country.”

CEO Africa Roundtable chairman, Oswell Binha said: “The continued pursuit of disinflationary policies will be key in stabilising prices and the exchange rate”

The National Business Council of Zimbabwe president Langton Mabhanga said: “Foreign currency is an issue in the industry. (Government) should let those earning foreign currency be given foreign currency, people who don’t earn forex mustn’t be allowed to access it from the Auction. That’s why there are always shortages . There should be discipline at the auction, that’s how the foreign currency issue can be solved.”