ECONOMIC stakeholders have raised alarm over a worsening liquidity crisis in Zimbabwe, which they say is crippling industry and deterring investment.
Since the introduction of the Zimbabwe Gold (ZiG) currency on April 5, fiscal and monetary authorities have adopted hawkish policies to stabilise its value. However, these measures have inadvertently tightened liquidity in the market, exacerbating challenges for key economic sectors.
During a panel discussion at the Zimbabwe Independent (ZimInd)’s 2024 Banks & Banking Survey and awards ceremony held in Harare yesterday, economist Eddie Cross said the country had been hit by a severe liquidity crisis.
The annual survey, held under the theme “Weaving Through a Dynamic Liquidity Terrain”, was sponsored by First Capital Bank Zimbabwe.
“The liquidity crisis in Zimbabwe is a major concern, especially from an industrial point of view. This year, for instance, there has been virtually no financing for agriculture, which is a critical sector of the economy,” Cross said.
“A friend of mine, who has the capacity, irrigation, and resources to grow substantial crops, has not been able to secure financing. This situation makes it challenging for agriculture to recover.”
He said in the past, every bank in Zimbabwe had an agricultural department with specialists who would work with farmers on budgets for crops.
“This seamless process allowed farmers to implement their plans, and banks would recover their money through stop orders. Unfortunately, this system no longer exists,” he said.
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“Today, there is a lack of understanding of agriculture among banks, making it difficult for farmers to access financing.”
He said the government needed to address the liquidity crisis in the country to rebuild its reputation.
Panelists noted that industry could not grow based on short-term financing, which is now the case owing to liquidity challenges.
“Industrial-based manufacturing companies in Zimbabwe are struggling due to various challenges, including structural changes in the 2020 budget and the move to a market-based economy. The country’s capital market is shallow, making it difficult for businesses to access equity financing,” Confederation of Zimbabwe Industries value chains and sectors coordinator Kevin Msipa said.
“Businesses are forced to rely on short-term financing and loans, which can be volatile and unpredictable. The lack of access to capital is becoming a major differentiator for businesses, with those who can access capital having a significant advantage over those who cannot.
“The priority for the new year should be to prioritise what needs to be done to address the challenges facing the manufacturing sector.”
First Capital Bank Zimbabwe chief executive officer Tapera Mushoriwa said they were committed to becoming a trusted partner in driving the economy.
“Through innovative financing and relevant digital banking technology, our aim is to create a sustainable banking model that promotes financial inclusion and offers solutions for all,” he said.
“To this end, we have forged strategic partnerships to secure offshore lines of credit, ensuring liquidity for sustainable financing across key economic sectors.”
Economist Gift Mugano said there was a need to set clear priorities instead of depriving the economy of much-needed liquidity.
He noted that the good rains alone would not be sufficient to revive the agricultural sector; instead, greater budgetary allocations should have been directed toward supporting its recovery.
“The major culprit in terms of driving excessive liquidity in the market is the Ministry of Finance,” Mugano said.
“But now, the central bank issues a statement to the government that you want to reduce liquidity, but you must never put a country on national fasting in the spirit of trying to reduce liquidity; straighten your priorities.”
In his opening remarks, Alpha Media Holdings chief executive officer Kenias Mafukidze said despite the challenges
being faced in the banking sector, there were still opportunities for growth.
“Banking in Zimbabwe is indeed a thrilling and dynamic field. Despite the challenges posed by inflationary pressures, exchange rate volatility, and the evolving crypto landscape, the opportunities for growth and innovation are vast,” he said.
Also giving her remarks, ZimInd editor Faith Zaba applauded the banks’ ability to remain resilient despite operating under a difficult environment.
“Despite the exchange rate volatilities, a depreciating local currency and highly informalised market, Zimbabwe’s banks demonstrated remarkable resilience,” she said. “Your ability to maintain stable liquidity conditions, uphold adequate capital buffers and pursue sustainable profitability is commendable.”
The Consumer Council of Zimbabwe's director of policy advocacy, monitoring, and evaluation, Patience Chikwiriro, expressed concern over persistent challenges facing consumers, including the prevalence of counterfeit goods and ongoing financial instability, largely driven by a stagnant manufacturing sector.
“The manufacturing sector has shown little to no growth, according to budget figures. Growth has remained at around 1% since last year, which speaks volumes about the limitations in what we can offer consumers in Zimbabwe in terms of local production,” Chikwiriro said.
“We have registered a substantial number of complaints about counterfeits. Why are consumers being exposed to these products? This issue underscores broader systemic challenges.
“The year 2024 has been particularly difficult for consumers, and the handling of counterfeits requires urgent attention, as it highlights the vulnerability of consumers in the current market environment.”
