CityPress - - Business - MEM­ORY MATARANYIKA busi­ness@city­press.co.za

Busi­ness ex­ec­u­tives and econ­o­mists warn that 2017 will prob­a­bly be worse for Zim­babwe than the fi­nan­cial dif­fi­cul­ties, cash short­ages and cur­tailed ac­cess to cap­i­tal that were ex­pe­ri­enced in the coun­try in 2016.

The sil­ver lin­ing is that some com­pa­nies have ap­proved new in­vest­ments for 2017.

Sev­eral oth­ers are strug­gling in an econ­omy with strin­gent im­port rules that is dom­i­nated by com­pany fail­ures and re­trench­ments.

Eco­nomic growth in Zim­babwe is pro­jected to be 1.7% in 2017, up from about 0.6% last year, ac­cord­ing to Fi­nance Min­is­ter Pa­trick Chi­na­masa.

He said “agri­cul­ture and min­ing are to drive over­all growth, with sec­tor growth of 12% and 0.9%, re­spec­tively, in 2017”.

To­tal gov­ern­ment rev­enues are pro­jected at $3.7 bil­lion against an­tic­i­pated to­tal ex­pen­di­tures of $4.1 bil­lion, lead­ing to a na­tional fi­nanc­ing gap of $400 mil­lion.

Zim­babwe’s un­em­ploy­ment rate is es­ti­mated at over 80%, but the gov­ern­ment ar­gues that more than half of the coun­try’s pop­u­lace is em­ployed in the in­for­mal sec­tor.

Zim­babwe has been in de­fla­tion over the past two years, but food short­ages have started to emerge and this is push­ing up prices.

Both TM Su­per­mar­kets, which has a part­ner­ship with Pick n Pay, and OK Zim­babwe have taken a knock from the im­port re­stric­tions im­posed by the gov­ern­ment ear­lier this year.

Re­tail ex­ec­u­tives told City Press that con­strained in­dus­try ca­pac­ity, cou­pled with the strin­gent im­port rules, could lead to food short­ages in 2017.

Ter­rence Yeat­man, man­ag­ing di­rec­tor of Spar Zim­babwe, said: “We are cur­rently stocked up with half lo­cal sup­plies and the other half is for­eign sup­pli­ers but we are now push­ing for our own man­u­fac­tured brands to ease the sup­ply con­straints. We have seen some de­lays in get­ting stock af­ter the im­port mea­sures.”

Spar Group South Africa has moved out of Zim­babwe, cit­ing dif­fi­cult op­er­at­ing con­di­tions, and the stores it was run­ning have now been trans­ferred to the lo­cal Spar group.

A man­ager with an­other re­tail chain said that, al­though re­tail­ers were still see­ing con­tin­ued use of cash by shop­pers, this was likely to change in 2017, with cur­rent trends show­ing a shift to plas­tic money.

The gov­ern­ment has al­layed fears of a bloated for­eign cur­rency cri­sis, with Re­serve Bank of Zim­babwe gover­nor John Man­gudya say­ing the gov­ern­ment con­tin­ues to im­port US dol­lar notes for the coun­try’s re­quire­ments to pay for elec­tric­ity and fuel.

Chi­na­masa said there would be no fuel short­ages as the gov­ern­ment pri­ori­tised fuel sup­pli­ers in terms of for­eign cur­rency al­lo­ca­tions.

“We have ac­tu­ally had to use money in the nos­tro ac­counts to pay for the im­por­ta­tion of phys­i­cal cash,” said Chi­na­masa.

Nos­tro ac­counts are bank ac­counts held by banks on be­half of their cor­po­rate clients for the purposes of re­ceiv­ing ex­port pro­ceeds and they are also used to pay off in­ter­na­tional trans­ac­tions.

Fi­nance man­agers said these were be­ing in­ter­fered with by the gov­ern­ment, which also re­quires that half of ex­port pro­ceeds be con­verted for use in­side Zim­babwe.

Most busi­ness ex­ec­u­tives are un­cer­tain of how 2017 will pan out and there are fears that the gov­ern­ment will start to tighten reg­u­la­tory and fis­cal con­trols.

At the height of Zim­babwe’s eco­nomic cri­sis in 2008, the cen­tral bank im­pounded cor­po­rate ac­counts to shore up gov­ern­ment finances and to set­tle press­ing obli­ga­tions.

“If this cash-short­age sit­u­a­tion does not im­prove, we may see the gov­ern­ment start­ing to im­pound com­pany ac­counts for for­eign cur­rency. This will be a blow to the econ­omy be­cause it also height­ens the risk per­cep­tion, which is al­ready bad at the moment,” said a cor­po­rate ex­ec­u­tive.

In 2017, the gov­ern­ment is ex­pected to fi­nalise the takeover of min­ing land be­long­ing to Zim­plats and fer­rochrome pro­ducer Zi­masco.

Of­fi­cials in­sist that the ex­cess land claims are be­ing taken over so that they can be al­lo­cated to new in­vestors, and the Cham­ber of Mines says the ef­fect of this will be more pro­nounced in 2017.

Al­though most of Zim­babwe’s cor­po­rates are fac­ing strong head­winds, some are see­ing be­yond the 2016 prob­lems and are look­ing for­ward to the long-term prospects with in­vest­ments ear­marked to boost op­er­a­tions and to grow pro­duc­tiv­ity.

Im­pala Plat­inum, ce­ment maker PPC – which re­cently com­mis­sioned a new plant in Harare – and OK Zim­babwe are among the few pour­ing in money.

OK Zim­babwe will open some new stores in the coun­try, while Im­plats has in­vested in a mine and its plans for a smelter fa­cil­ity will con­tinue in 2017.

Bin­dura Nickel Cor­po­ra­tion man­ag­ing di­rec­tor Bati­rai Man­hando said the nickel miner and pro­ces­sor ex­pected to “com­plete the smelter project in the next fi­nan­cial year”, as the com­pany has al­ready “pur­chased most of the equip­ment” re­quired.

“We have re­duced vol­ume but in­creased the qual­ity of the ore. We will look at cost per­for­mance with a view to op­ti­mis­ing,” he said.

This shows that cost-cut­ting will be a ma­jor fo­cus area for Zim­bab­wean busi­nesses in the new year as they seek to protect profit bases.

Econ­o­mists said this could also trans­late into more lay-offs and re­trench­ments as cap­i­tal hold­ers protect earn­ings po­ten­tial.

Said economist Moses Moyo: “The year 2017 is look­ing less en­cour­ag­ing from a busi­ness and eco­nomic per­spec­tive be­cause of an en­vi­ron­ment that is look­ing worse and worse. It will also likely be a dif­fi­cult year for trade unions, with some com­pa­nies likely to in­ten­sify lay-offs and oth­ers set to scale down or close shop.”

The Cham­ber of Mines has said that it will not af­ford a salary hike in 2017, while econ­o­mists say more com­pa­nies are likely to lay off work­ers in line with the ex­pected slump in rev­enue and profit gen­er­a­tion.


CUR­RENCY CRUNCH A man reads a copy of a lo­cal daily in Harare, Zim­babwe, in Novem­ber last year

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