Zimbabwe’s economic collapse alarms business

via Economic collapse alarms business – DailyNews Live by Ndakaziva Majaka  20 MAY 2014

With the carnage within commerce and industry escalating at a rapid pace, organised business has added its voice to growing calls for political dialogue in the country as the only solution to Zimbabwe’s deepening economic crisis.

Confederation of Zimbabwe Industries (CZI) president Charles Msipa told subscriber-based financial news provider Business Live this week that the only “way out of our situation is a political solution”.

This comes as the country’s economy — which had recovered noticeably from a decade-long meltdown during the country’s coalition government between President Robert Mugabe and former Prime Minister Morgan Tsvangirai — is hurtling towards a mega recession last witnessed in 2008.

Since the country’s disputed elections last year, both local and international investors have withdrawn from the economy in droves, which has seen hundreds of companies shutting down and tens of thousands of critically-needed jobs being lost.

The economy has since this year slid into the much-dreaded deflation zone, with some FROM P1

analysts significantly slashing the country’s 2014 economic growth prospects from the government’s overly optimistic 6,1 percent forecast, to negative territory.

The manufacturing sector is particularly depressed, with official capacity utilisation slumping from 44,9 percent in 2012 to 39,6 percent in 2013.

Msipa said: “Everyone should do their job, politicians must swallow their pride and industry must work on economic solutions so that we save the country,” he said.

Msipa said the dialogue was crucial and had to happen soon.

“No matter how much the ministers and industry work hard, this problem requires input from all leadership quarters,” he said.

His remarks came amid growing calls from the country’s opposition in particular for political engagement and drastic changes in government’s attitudes and policies.

Apart from Tsvangirai himself calling for this kind of necessary dialogue, former finance minister Tendai Biti also told a recent Sapes Trust Policy Dialogue forum that Zimbabwe was in a crisis that required political dialogue.

“The reality of our situation is that Zimbabwe is in a crisis and a deep structural crisis. Crisis of legitimacy, crisis of leadership, crisis of confidence, a structural economic crisis underlined by depression … they are all coinciding in one place,” he said, adding that “those in leadership need to… come up with a solution,” Biti said.

Official statistics from the Labour ministry indicate that although the number of people who have been retrenched went down from 4 007 in 2012 to 2 376 in 2013, the real situation on the ground is much worse as more companies continue to collapse and to retrench employees.

According to the CZI, the manufacturing sector alone requires about $8 billion for working capital and equipment upgrades, among other pressing needs — funds that are simply unavailable in this market.

As if to ram the point home about the dire state of the Zimbabwean economy, Msipa’s observations came as diversified and “old money” group, Meikles, made the staggering announcement yesterday that it was shutting down its upmarket Greatermans Store and replacing it with Pick n Pay Supermarkets with effect from the end of June this year.

Most Zimbabwean retailers are finding the going very tough due to the prevailing acute liquidity crisis, which is coupled with low disposable incomes.

Retailers also face stiff competition from cheaper imports mainly from China and South Africa.

Greatermans, located in the Harare central business district, and which sells clothing and furniture, has been a major retail player in the country for many decades.

Late last year, Meikles announced plans to make forays into the lower end of the market as part of its strategies to boost revenue and unlock shareholder value in the deteriorating current business climate.