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.