BUSINESSES in Zimbabwe have bemoaned a myriad challenges that the sector is facing perennially saying the internal and external factors have continued to undermine its efforts for recovery and growth, NewsDay can report.
Chief among these challenges include the severe shortage of foreign currency for businesses whose supply chains are regional and international as well as a volatile exchange rate and depreciation of the ZiG against US dollar.
Giving his remarks at the 42nd Employers’ Confederation of Zimbabwe (EMCOZ) annual congress in Victoria Falls yesterday, the host organisation's president Demos Mbauya said the erosion of disposable income and consequent negative impact on aggregate demand remained problematic.
The congress is running under the theme Adaptability and Resilience.
“There is severe shortage of foreign currency for business, whose supply chains are both regional and international. Companies are failing to secure foreign currency for critical raw materials and space,” he said.
“The emerging buyer-seller market is more buyers than sellers. Talking to some of my colleagues in the industry, when they submit their bids for acquisitions to buy foreign currency on the emerging buyer-seller market, their strike rate is around 10%.
“If you go to the willing buyer-seller market, it has been US$400 000, but they are hedging about US$10 000 or US$15 000. This is creating a serious logjam in our supply chain and, therefore, our ability to fulfill our customers’ demands.”
He said the volatile exchange rate and continued depreciation of the ZiG currency against the US dollar has diminished confidence, leading to a more polarised informal economy, marked by low wages and limited social protection.
Mbauya said depreciation of the local currency was pushing businesses to the brink.
“The erosion of disposable income and investment-needed impact is also subduing the aggregate demand. There is an over-regulation of the informal economy in Zimbabwe, and this has precipitated an upward informalisation of the economy, with a high risk of industrialisation,” he said.
“Also to mention the issue of power and energy is severely affecting business operations. No business or no country can operate at optimum capacity if there is no energy.
“In addition to all these things, there are some issues in our global economy that we need to deal with. There is a trust deficit and low confidence levels among social and economic actors.”
He said this was also compounded by climate change and wind-waste-induced droughts and the negative impact on businesses that are linked to the agricultural value chain.
“The situation that we have right now is reminiscent of what we experienced in 2006 to 2008. I’m sure you all recall the economic meltdown that we experienced. Companies are now looking at downsizing and retrenchment,” Mbauya said.
He said there was an urgent need for action to prevent this serious economic meltdown.
Considering the unstable exchange rate issues experienced last month, Mbauya said, management of the exchange rate was of paramount importance adding that a stable exchange rate and inflation rate would contribute towards economic growth.
He said once the macro-economic environment is stable, the country needed to focus on locally produced goods and services to accelerate domestic production in the spirit of import substitution and self-sufficiency.
“The draft social contract is to be discussed and adopted by the main TNF [tripartite negotiation forum] so that the pillars in the document are approved and implemented,” Mbauya said.
“The current power crisis is affecting business viability. While water levels have not improved in Lake Kariba, full impact on electricity generation is being felt soon.
“We need to put in place some financial assistance to benefit companies in distress for them to be in a position to source alternative sources of power such as solar and heavy-duty generators.”
