Companies suffer heavy losses as economy stutters

via Companies suffer heavy losses as economy stutters – DailyNews Live by John Kachembere  4 APRIL 2014

Zimbabwe’s companies are posting heavy losses — an ominous sign of accelerated economic decline.

Coal miner, Hwange Colliery Company Limited (HCCL), has registered a $44 million pre-tax loss for the year to December 2013.

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.

Farai Mutamangira, the HCCL chairman, blamed the worsening losses on the punishing economic environment and falling international metal prices.

“The commodity prices, for coal and coke significantly declined and was affected by demand in ferro-alloys and steel products,” he said, adding the liquidity crunch prevailing on the local and global economies militated against short term plans that the HCCL had to recapitalise its operations.

“Foreign lines of credit continued to be elusive and the local banks remained illiquid and thus unable to avail any meaningful credit. Consequently, borrowing costs remained high and all facilities remained short term and not compatible with the company’s operating model.”

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.

Sam Malaba, the Agribank chief executive, said inadequate capitalisation of the bank resulted in funding and liquidity challenges and the inability to underwrite business growth.

“It also meant having to make recourse to expensive market fixed deposits and the inability to attract significant deposits,” he said.

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 recorded heavy losses in the period under review.

Figures released by treasury indicate that at least 15 manufacturing firms shut down in February alone, as consumer demand collapsed by about a third and mineral output stalled, intensifying fears the country is sliding into an extended deflationary phase.

This comes after the Zimbabwe Congress of Trade Union recently waved a red flag after 75 companies closed shop last year forcing over 9 000 workers into the streets.

“With regards to prices, a deflation of -0,49 percent was recorded during the month, a development that is expected to persist in the outlook,” said the latest Treasury monthly bulletin.

“In this regard, deflationary pressures experienced during February will continue to affect the economy in 2014, due to an extending negative output gap.”

Government registered a budget deficit of $16,8 million in February compared to a surplus of $17,8 million in January, as revenue collections declined, further reflecting the economic slow-down. February revenues were $248 million against a target of $273,3 million, resulting in a negative variance of $25,3 million.

The February expenditures amounted to $264,8 million, 58 percent of which went to pay civil servants.

Value Added Tax (VAT) contributed the bulk of tax revenue at 33 percent,  Pay As You Earn (PAYE) 24 percent, Excise Duty 14 percent while non-tax revenue remained subdued at four percent.

As the Zimbabwean economy sinks deeper into recession, the Zanu PF-led government is silent on the worsening economic situation in the country.

Economist Christopher Mugaga said the worsening economic conditions will deprive government of the crucial PAYE and VAT to fund its activities.

“Government must, as a matter of urgency, address the country’s external debts because as long as this debt remains in place, it will be difficult for Zimbabwe to attract foreign direct investments, cheap loans and overseas development assistance,” he said.

 

COMMENTS

WORDPRESS: 9
  • comment-avatar
    Chidumbu 7 years ago

    Blah Blah Blah yet another African success story, you have all shown your worth time and time again, bunch of cowards scared of a 90 year old geriatric

    • comment-avatar
      ShabbaRanks 7 years ago

      Success story? Come again? Zimbabwe is one of the five worst countries in the world to live in. When the US & UK invade and destroy the fleeing remnants of the worthless Mugabe Zanu-PF government, that’s when the rebuilding of a once great nation will begin. Mugabe – off with his head. And his wife’s too.

      • comment-avatar
        Don Cox 7 years ago

        “When the US & UK invade”

        There is not one chance in ten million of that happening. Zimbabwe has no Islamic terrorists who might pose a threat to the US or UK.

        There is absolutely no reason for them to invade.

  • comment-avatar
    John Thomas 7 years ago

    The damage is all done. Even when there is an eventual recovery things will never be the same. The friendly Zimbabwe some of us knew is over. The new Zimbabwe will be hard and bleak. Dog eat dog.

  • comment-avatar
    Zambuko 7 years ago

    We can expect little from the current ruling elite, who have lost the capacity to lead the country, though not their capacity to feed off the carcass. While we wait for nature to take its course we can reflect that the death of HE may not be the end of the decline. Once the head has been cut off the body still has to fall to the ground. The only solace is to be found in Marley’s “it may be for long but it won’t be forever”.

  • comment-avatar
    roving ambassador. 7 years ago

    With the right people in leadership, I personally think it will take us only 5 years for a turn around. The Irish have done it in less.
    We should just make sure the Mugabes and the Tsvangirais are tainted with the corruption scourge , heavily tainted.
    Their style of leadership is as ancient as Europe in the 1500s.

    We need new social democratic leadership now.

    • comment-avatar
      roving ambassador. 7 years ago

      Sorry, meant . make sure we get rid of these useless leaders.

  • comment-avatar

    Let’s listen to the Zunde message Let’s sing it. Visit http://Www.zunde.org. . Even the tainted Mdc T and Mdc Team and CIO fake counter intelligence movements that are suddenly sprouting up are trying to dilute the ZUNDE vision.

  • comment-avatar

    Zimbabwens are cowards . And they will never act