gtag('config', 'UA-12595121-1'); Zimbabwe business to absorb shocks of the economy – The Zimbabwe Mail

Zimbabwe business to absorb shocks of the economy

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HARARE – As worries about inflation, exchange rate depreciation, falling aggregate demand and slowing economic growth persist, business leaders say they will focus on just keeping businesses “alive” in 2020.

The country’s economy is yet to settle from the turbulence caused by transition from the multi-currency system to the Zimbabwe dollar and the accompanying policy measures in line with the Government’s Transitional Stabilisation Programme.

Finance and Economic Development Minister Mthuli Ncube, says what the reforms have done is to simply “lift the lid off the boiling pot” a move he says will bring about the changes Zimbabwean citizens are longing for if the country can stay the course.

But the past 12 or so months have not been easy for the Zimbabwean economy as businesses continued to battle with a plethora of challenges that threaten viability.

At the centre of the challenges is the availability and cost of foreign currency, which has seen businesses fail to acquire much needed raw materials and meet other foreign obligations.

Production, for some businesses, has also been crippled by erratic supply of electricity, fuel and water.

Also pertinent has been the weakening consumer purchasing power that has seen most businesses record declining sales volume.

As a result, business executives plan to focus on consolidating current operations and making sure their businesses survive the turbulence currently bedevilling the economy.

“What is key for now is to stay alive, it’s a consolidation year,” said Truworths chief executive officer Themba Ndebele.

He said the impact of drought, forex and electricity shortages is telling on the economy and this is reflecting on business operations.

“Liquidity and the ability to service accounts is under pressure at the moment and our focus this year is to move the business towards cash basis,” said Ndebele.

He said the consumer is seriously constrained and the clothing retailer, which in recent past was offering 12 months’ credit facilities, is now moving towards six months’ offerings with a view of going completely cash if inflation remains high.

Ndebele’s counterpart at Dairibord Holdings Limited, Anthony Mandiwanza, said as a result of the “debilitating drought” among other challenges, what will be key for the business is “survival”.

He said there is need to hold on “to the business we have” and getting adequate milk supplies will be a key focus area.  Mandiwanza said the ongoing drought has serious implications on livestock and by extension, milk supply which is key to sustain the business.

He said another important area of focus would be how to access foreign currency, which is mostly needed for importation off raw and packaging materials.

“The other area that would need close attention, is the capacity and ability to consume products by consumers. A key question would be how to sustain the consumer’s purse,” said Mandiwanza.

The Dairibord boss said what would be key in the new year is how authorities will deal with issues regarding the cost and availability of electricity, water and foreign currency, while inflation will also have to be tamed.

“If electricity supply is as bad as it was last year, then the costs and disruptions will not be good for business. We have also been purchasing raw water from bulk water suppliers and the costs and the associated inconveniences of doing that are huge,” said Mandiwanza.

As a result of the difficult operating environment, Mandiwanza said the dairy processor has not planned for any expansion capital expenditure.

Mandiwanza said while capex for expansion projects “is not on our radar” the Group would obviously spend on maintaining the business in good shape.

United Refineries chief executive officer Busisa Moyo, however, sees things differently saying “market opportunities within Zimbabwe are still one of the best in southern Africa in spite of acutely constrained demand in 2019, provided that there is a modicum of macroeconomic stability”.

“Most of our resource, logistical and human talent comparative advantages still remain unexploited. Work is needed in social cohesion, dealing effectively with corruption so that it allows for formal sector to remain viable and re-stimulating production and expanding productivity.

He, however, said a major drawback to the country’s economic revival is “the lack of social cohesion and the absence of a comprehensive stabilising social contract”.

Also of major risk to economic performance, according to Moyo is limited economic and employment opportunities for “our energetic and capable youths who are resorting to heinous crimes and using gang violence to earn a living”. – Business Weekly