via Zim companies uncompetitive: Chinamasa – DailyNews Live 25 January 2015
HARARE – Finance minister Patrick Chinamasa says Zimbabwean companies are repelling foreign investors due to their uncompetitiveness.
“For the past few years I have been engaging with various investors from different countries and they have all repeatedly said local companies are unattractive for investment because there are no new ideas being generated in the economy to support them,” he told industrialists at the Confederation of Zimbabwe Industries 2015 Economic Outlook Symposium on Thursday.
Chinamasa said last year he met fund managers from Europe, Canada and the United States who expressed concern over the non-performance of most counters on the Zimbabwe Stock Exchange.
“Fund managers prefer to invest in running businesses, but after assessing the ZSE they noted that there were only a few counters trading and they didn’t see any new offerings any time soon,” he added.
There are 73 companies listed on Zimbabwe’s industrial index, which has dropped 12 percent over the past six months and 19 percent over the past year
The equities market took a knock soon after the July 2013 harmonised elections and since then has struggled to find traction.
The slower economic growth projected for 2015 and the disappointing 201 and 2013 earnings have contributed to weakening stock prices across the board.
Market experts say the equities market has also been affected by delistings and suspensions which peaked in 2014 as companies faced mounting viability challenges.
Chinamasa said Norwegian investors who were in the country this week said didn’t find any company worthy investing in.
“I have also observed that companies whose leadership has failed “to do the right thing” have been struggling. Leadership has failed to adapt to the dynamic environment where competitiveness is the name of the game. And competitiveness can only be achieved if and only if, the leadership is pragmatic about the company’s cost structures, especially wages, gearing levels, procurement and production systems,” he said.
The Finance minister noted that a high cost base triggers and perpetuates a vicious cycle.
Your products become less competitive, you lose your customers, while on the other hand huge fixed overheads are silently bleeding your business,” he added.
Economic analysts however said the country is struggling to attract investment despite holding the world’s second-largest chrome and platinum reserves, partly due to policy uncertainty related to its indigenisation laws, which are meant to give black Zimbabweans control of businesses.
Presenting the 2015 national budget statement last year Chinamasa said urgent injection of fresh capital was critical towards resuscitating ailing industries whose capacity utilisation has dropped by three percent from 39 percent to 36 percent, according to the Confederation of Zimbabwe Industries (CZI) survey.
The minister reported that 2 130 firms closed shop in 2011 and left 19 121 workers stranded.
He said in 2012 a total of 1,468 companies also shut down and rendered about 20,825 workers jobless.
In 2013 878 firms also collapsed and offloaded 14 499 workers. While last year 134 companies closed shop leaving 928 destitute. Altogether the minister said 4 610 companies have collapsed since 2011, leaving 55 443 workers stranded.
“Fresh capital injection is needed for retooling, overhaul of antiquated machinery and recapitalisation to ensure we resuscitate our industry,” he said.
The minister said part of the measures to revive industry bordered around clarification of indigenisation regulations, removing bottlenecks around the ease of doing business, reviewing pricing and labour impediments and attracting increased foreign direct investment.