Business gives economy thumbs down

By Blessed Ndlovu | Dec. 12, 2023 | 3 Min read

This low score came a day after the Zimbabwe National Chamber of Commerce released its 2023 annual State of the Industry and Commerce Survey in which 38% of those surveyed saw an economic improvement.

CHIEF executive officers and senior executives have given a vote of no confidence regarding the economy, recent data from the CEO Africa Roundtable’s Business Confidence Index (BCI) shows.

Releasing the 2023 BCI last Friday, CEO Africa Roundtable chief executive officer Kipson Gundani told NewsDay Business that the report was indictive of a pessimistic attitude of business.

“The confidence index was done before the budget, but nevertheless, it paints a pessimistic picture where most of the executives are pessimistic about the future. And, if you are to judge from the comments then given after the budget, I think most executives feel worried about the level and types of taxation within the budget,” he said.

“They also paint a very bleak picture about the macro-economic framework that is expounded by the budget. Notable items are to do with wealth tax and the IMTT (Intermediated Money Transfer Tax) which in its design was meant to bring the informal sector into the tax bracket.”

However, he said that given that the informal sector was at 90%-95% cash basis, it meant the tax will not serve its intended purpose.

“So, I think we strongly feel that the budget is not in sync with reality,” Gundani said.

According to the BCI, overall business confidence, which was calculated by averaging all the responses from the 257 respondents that participated in the index, gave a BCI score of -40,2.

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Looking at the main factors affecting business confidence, 79,4% of the respondents cited exchange rate volatility and inflation as the major factors.

This was because the Zimdollar has depreciated by over 700% against the greenback.

Financial sector instability was the second biggest factor weighing down business confidence levels with 50,2% of the respondents complaining about it, amid a sharp decline in local financial institution lending.

The third biggest factor weighing down business confidence was the regulatory environment which 41,6% complained was hurting their operations. Most of these complaints relate to the excessive cost of doing business relating to taxes, levies and other regulatory charges.

Another major factor cited was political stability, of which, 39,7% of the respondents cited as a constraining factor as the August general election remain disputed.

“A negative Business Confidence Index typically indicates a pessimistic outlook among businesses regarding the state of the economy and their own prospects,” CEO Africa Roundtable chief economist Tatenda Nyachega said.

“The Business Confidence Index is a measure that assesses the prevailing sentiment and expectations of businesses regarding factors such as employment, company expenditure, exports, company revenue, and overall economic conditions.”

CEO Africa Roundtable chairperson Oswell Binha said Zimbabwe was a perennially fragile economy.

“For years, we have failed to create the much-needed macroeconomic scaffolding to either exploit global economic booms or protect it from both internal and external threats. The sophistication of the Zimbabwe economy needs more than just taxation for survival,” he said.

“We have lost an opportunity to capitalise on mineral price boom due to internally-induced challenges, particularly in the mining and mineral sector. When global metal prices are at their all-time high, our productivity is always at its lowest. We are threatened to extinction by the continued decline of PGMs (platinum group metals) prices, which hover on or below US$900/t.”

He said Zimbabwe’s economic environment was extremely volatile mainly for formal organised businesses, and the proposed 2024 national budget was a sledgehammer to both corporates and individuals owing to its excessive taxes amid economic turmoil.