Zimbabwe’s Business Sector Struggles Amid Inflation and Currency Instability

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HARARE – Zimbabwe’s corporate sector is reeling under immense economic pressure, grappling with runaway inflation, currency instability, and soaring operational costs.

The dire economic environment has forced businesses to retrench workers, cut costs, and reduce stock levels, underscoring the fragility of the country’s economy.

Among the hardest hit is Tongaat Hulett’s Zimbabwean subsidiary, Triangle Limited, which recently announced phased retrenchments after other cost-saving measures proved ineffective. The company cited escalating operational expenses, including fertiliser, fuel, and maintenance costs, compounded by inflationary pressures and currency losses.

“The current economic environment in Zimbabwe has presented unprecedented challenges for Triangle Limited over the past three years. After extensive evaluation, we have made the extremely difficult decision to implement a phased retrenchment process,” Triangle Managing Director Tendai Masawi said in a statement to employees.

Masawi highlighted that the company’s profit margins had declined by 55%, manpower costs had risen by 133% as a proportion of revenue, and debt levels had reached unsustainable heights. The company also struggled with constrained cash flows and a lack of working capital.

“These financial realities underscore the urgent need for corrective action so the business can generate sufficient cash flows to reduce debt and reinvest in its future. This decision has been taken to protect the long-term sustainability of our organisation and ensure that Triangle Limited continues to play its vital role in Zimbabwe’s economy,” Masawi added.

Triangle Limited, which manages Tongaat Hulett’s Zimbabwean operations, including Hippo Valley, is set to be sold to Vision Group for approximately R5.9 billion. Despite the parent company’s broader financial troubles in South Africa, its Zimbabwean division had been one of its more stable operations.

The challenges are not confined to manufacturing. Retailers such as OK Zimbabwe and Choppies are also feeling the pinch, with stock levels significantly reduced. The retailers cite government policies mandating local currency transactions in an economy where foreign currencies dominate.

OK Zimbabwe acknowledged the strain in a recent statement: “The company faced intermittent product supply challenges during the festive period. The formal retail sector has been adversely impacted by a volatile operating environment.”

De-stocking at OK Zimbabwe outlets has sparked concerns that the retailer, like many others, is buckling under Zimbabwe’s unstable monetary framework.

Meanwhile, manufacturers such as Mega Mart have appealed to the government for structural reforms aimed at expanding the formal sector. They argue that such reforms would bolster tax revenues and support broader economic recovery.

Zimbabwe’s economic instability has also led to high unemployment rates, driving many citizens to seek opportunities abroad, primarily in South Africa and other parts of the region.

The situation paints a grim picture for Zimbabwe’s business landscape, with many companies in survival mode as they navigate the country’s challenging economic terrain. Structural reforms and fiscal stability remain critical to reversing the downward spiral and fostering a conducive environment for businesses to thrive.