via Where are we going? – DailyNews Live by Kudzai Chawafambira 7 MAY 2014
A litany of warnings from senior executives at listed companies is signalling that Zimbabwe’s economy faces significant mayhem for the next several quarters, with a recovery not likely to kick in anytime soon.
The slump has also pushed some companies to retrench, with many saying the prospects of Zimbabwe’s economic revival remain uncertain, indicating tough times ahead.
The warnings have come from a diverse range of businesses across the industrial spectrum, particularly those exposed to the complications of the turbulent Zimbabwean economy.
The companies’ reporting period has traditionally caused the Zimbabwe Stock Exchange (ZSE) to pick up. As a result of the economic recession being faced by the nation, unemployment remains high while the majority continue to wallow in extreme poverty.
The equities market has been severely affected by de-listings and suspensions, as companies faced mounting viability challenges while dozens of companies are folding every weekly rendering thousands unemployed.
In the first quarter to March 2014, the market’s capitalisation slumped by $642,8 million to $4,56 billion as stock prices plummeted.
Leonard Tsumba, Dairibord chairman, said in the listed milk processor’s financial results that “the economic outlook for 2014 will continue to be challenging.”
Several companies, sensing a need for belt-tightening in this worrisome environment, have made sharp cuts in their work force.
“Concomitantly, business models structured around the past paradigms will fail leading to higher unemployment and company closures,” Tsumba warned.
He said only strategic rationalisation of business together with the other cost reduction measures going forward, will spur their business to return to profitability this year.
Richard Wilde, chairman of CBZ Holdings (CBZH), the largest banking portfolio by deposits, said “the need for long-lasting solutions to the funding challenges and the resuscitation of the manufacturing sector remains priority for the economy to register positive growth.”
Cigarette maker BAT’s chairman Kennedy Mandevhani said trading conditions have remained challenging “as the country continues to strive for economic growth and stability.”
Corporations learned the lesson during Zimbabwe’s recession that they need to make deep cost cuts very quickly when their revenues start to go soft.
Barclays’ chairman Anthony Mandiwanza said their hope is that “government’s economic policy framework will ensure a stable and sound economic landscape to support private sector ambitions which would see this economy reclaiming its rightful space.”
Global insurer Old Mutual (OM)’s Zimbabwe unit indicated that the country’s constrained operating environment is likely to persist on the back of subdued demand and shortages of cash.
The group’s chief executive Jonas Mushosho said Zimbabwe faced a “stagnant and shrinking economy.”
Nicoz chairman Albert Nduna said in his financials “growth prospects for the economy and the insurance sector in particular remain subdued.”
In the period under review, Turnall’s chairman Herbert Nkala reported that liquidity constraints were expected to persist in the medium to long-term.
Gregory Sebborn, chairman of Masimba Holdings, a listed construction company, said he anticipated that business conditions will remain constrained this year with continuing liquidity challenges.
“Politically, there are indications of moves towards a thawing in relations with some governments in the European Union,” Sebborn said.
“In addition, there are ongoing discussions with multilateral institutions, which are a positive indication of intent by the government.”
He warned that while these initiatives will not lead to a short-term uplift in economic activity, the real key driver will be government’s ability to harness financial resources required to kick-start infrastructure projects.
“Mindful of the potential liquidity trap typically associated with government projects, the group will continue to participate in its construction projects,” Sebborn said.
“Where possible, the group will endeavour to participate in the creation of financial solutions for such projects without introducing unnecessary risk to the group.”
Most companies posted heavy losses — an ominous sign of accelerated economic decline.
Coal miner, Hwange Colliery Company Limited (HCCL), has registered a $44 million pre-tax loss.
HCCL, which is a critical component in Zimbabwe’s economic growth as it provides coal to fire industries as well as electricity generation, widened its loss to $44 million from the $4 million loss suffered in 2012 due to deteriorating economic conditions in the country.
Agriculture-focused financial institution, Agribank, also suffered its worst loss in the dollarised era, with the bank recording $9,2 million loss in the full year to December.
Other key companies and financial services firms which are critical to economic development and growth such as POSB, MetBank, Allied Bank, NMB Holdings, Turnall Holdings, First Mutual Holdings Limited and Zeco Holdings all recorded heavy losses in the period under review.
COMMENTS
Thawing of relations etc is not enough. We need wholesale change of govt. The present incumbents do not have any credibility and cannot be trusted to repeal offensive laws, and if they do, they cannot be trusted not to resuscitate them when it suits them. This is the result of 34 years of systematic and cynical erosion of the truth, people’s lives, people’ s dignity, and the economy.
TO THE DOGS, NOT MY DOGS THOUGH, THEY ARE TOO SMART!
We know where Zimbabwe is going under the current government and that is a place where normal people do not want to go. The government has subdued us to the extent that we are allowing it to destroy us and our children
Unbelievably a former Deputy Reserve Bank Governor, economics lecturer and now Chairman of a major local bank believes in the resuscitation of defunct industry as the route to growth. Just take a drive through the once thriving industrial sites of Southerton, Workington and Belmont. Industry that served a closed economy has gone, and gone forever. There may be a small niche for specialised industry serving the mining sector, mineral processing value addition or agricultural equipment for commercial production when that returns, but traditional engineering, homegrown electronics, fabrics and so an are a thing of the past. Zimbabwe is no different from the rest of the world of supply and demand, but there are those who still adopt the ostrich position.
Its not going IT HAS GONE to Hell and the Dogs iCHO
Mugabe said he does not want bookish economics and here we are. Gonoconomics failed. What next? Go the DRC and Somalia way and blame Bush and Blair.