Economic outlook bright as stability holds

WE are encouraged by the relative calm on the market which has seen prices stabilise on the back of a functional Reserve Bank of Zimbabwe weekly foreign currency auction system.

We are delighted that the local unit — the Zimbabwe dollar — continues to firm and gain ground on the United States dollar, further vindicating the decision to adopt a transparent and open foreign currency trading system which has been Godsend for local industry and commerce.

Suddenly, Zimbabwe’s economic prospects for the second half of the year look bright and company executives are hopeful that if present conditions persist, they might experience a boom beginning first half of next year.

Stability allows for long term planning a critical ingredient for a successful business and we urge monetary authorities and Industry to continue working together to ensure the success of the auction system which has done wonders for the economy.

The volatility which characterised the first half of the year is now a thing of the past and the parallel market trade in foreign currency now faces extinction as big businesses continue to repose their trust and earnings on the auction system. As more foreign currency flows through the formal banking system, prices will stabilise further, or go down even, with market forces determining them. It is unfortunate that there are still some businesses that are pricing their products based on the parallel market rates (which by the way have been holding steady or falling even) but this will soon come to pass as these businesses access forex from the auction system. Barring that, they too might fall victim to market forces as big players flex their muscles using their economies of scale.

By and large, the forex auction system has been able to meet demand from competing bids and the healthy competition on the market has been refreshing. As more exporters acquit their earnings through the formal system, the auction will be adequately funded, allowing it to incorporate more players, further dealing a blow to the dwindling black market.

On Tuesday last week, the Zimbabwe dollar marginally gained against the greenback to close at $81,44 against $81,50 the previous week. This is the fifth consecutive week that the local unit has appreciated, recovering from a low of $83,40 last month.

Considering that the Zimbabwe dollar was only floated in June, having been pegged at $25 to the US$ before that, this has been a remarkable achievement. Elsewhere on these pages, we note how company executives are projecting a positive outlook on the back of the prevailing stability. The executives, who include bosses of some of the biggest companies in Zimbabwe, are bullish as they look ahead to 2021.

Of the eight firms that were analysed by our sister paper Business Weekly, only one

— Fidelity Life Assurance — did not mention expansion plans. Industrial behemoth Innscor, which has interests in many sectors of the economy, is betting on the good rainfall season that has been forecast to provide low-cost raw materials for industry.

Regional and local rainfall forecasts say the country is likely to experience normal to above-normal rains in the forthcoming summer cropping season. Innscor chair Mr Addington Chinake said the group would continue to “assess and investigate capital projects which will provide long-term business model optimisation and efficiency”.

He said the group would evaluate growth opportunities in both adjacent and new categories in pursuit of its ongoing desire to create value for shareholders, including playing a role in successfully re-building the nation.

Innscor is one of the biggest grain consumers in the country, and efforts to build internal capacity through contract farming, corporate farming, smart partnerships and small-scale capitalisation to supplement the supply of imported primary raw materials will likely have a positive impact on its operations.

“Management of inventory pipelines is one of the key critical success factors for a business of this size and nature, and so working capital and debt financing will continue to receive priority attention,” Mr Chinake said.

Management at National Foods, a unit of Innscor, said “investments into the company’s manufacturing facilities continue on an ongoing basis in an effort to further improve efficiencies and lower costs”.

Axia, which is another subsidiary of Innscor, believes that while trading conditions going into the new financial year remain largely unchanged due to the impact of Covid-19, this will still “present opportunities and the Group will continue to evaluate investment opportunities to preserve and sustain value for all stakeholders”.

Zimplow Holdings — a manufacturer of a diverse range of products for the agriculture, mining and construction sector — remains cautiously optimistic. Board chair Mr Thomas Chataika believes there are good leads in the construction and mining industry that are worth pursuing.

First Mutual Properties is actually optimistic about what the future holds.

“We expect resilient demand off corporate occupiers, as this client group may require larger space in order to embrace non-pharmaceutical Covid-19 protocols,” the property concern said.

Similarly, construction company Masimba currently boasts of a “solid order book”.

Dairibord expects the second half of the year to present better prospects and opportunities for business owing to a relatively stable exchange rate and improved availability of foreign currency through the auction system, which is forecast to improve availability of critical raw materials and packaging materials.

We hail the companies for their optimism and drive to take Zimbabwe forward. Their optimism is not misplaced as it is anchored on the stability they see prevailing on the market. Government, on its part, must continue creating a conducive environment which enables businesses to thrive.

We are aware that Treasury is currently assessing the impact of its two-year Transitional Stabilisation programme which comes to an end this month.

As it does so, it must take into account the concerns of industry and commerce and the positive impact of the RBZ auction system.