Pressure mounts on Zimbabwe
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Harare - More Zimbabwean companies could close if the government and the business sector failed to come up with measures to address liquidity challenges, cost structure and delayed payments buffeting the economy, the Confederation of Zimbabwe Industries (CZI) warned on Wednesday.
Finance Minister Patrick Chinamasa has projected economic growth of 1.7 percent for Zimbabwe this year, but business leaders and company executives are sceptical of this growth rate. Last year Zimbabwe’s economic growth rate was a paltry 0.6 percent.
Now the CZI, which represents big manufacturers, is engaging the government to come up with solutions.
“Companies could close and we could end up with a dire situation,” the president of the CZI, Busisa Moyo, said yesterday.
The representative grouping had lobbied the government to adopt the rand for use in Zimbabwe last year but Harare turned this down and moved forward to introduce local bond notes that are holding the fort so far. The bond notes have equal value to the US dollar in Zimbabwe.
However, industry representatives in Zimbabwe are still pushing for “internal devaluation” which essentially represents the cutting down of prices, tariffs and other costs such as labour. Industry leaders and government officials will meet to try to come up with solutions to the economy on January 26 in Harare.
“Companies are applying for short working hours and are laying off workers. All manufacturers have been affected adversely by delayed payments (precipitated by liquidity challenges),” Moyo said.
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The outlook for this year looked bleaker, according to industry sources, but the upcoming tobacco marketing season would provide some sort of respite for the economy in terms of foreign currency earnings.
Some companies are looking beyond the short-term outlook, with PPC anticipating increased production from its new plant in Harare, while the Delta Corporation has lined up two new beer-manufacturing plants in the country.
But signs of a struggling economy are everywhere, with people still lining up to withdraw cash and companies reeling under a heavy tax saddle.
Earlier this week the government announced new steep tariffs for mobile data, which will see the cheapest mobile data charge giving subscribers about 10MB for 50c, with a portion of this expected to go into a health fund and other taxes.
The government extended its begging bowl to diaspora Zimbabweans to remit more money home and financial service firms are inking partnerships to tap into the market.
Econet Wireless said yesterday that it had partnered with TransferTo to boost remittances from South Africa through the Mama Money financial services company. The partnership will enable Zimbabweans settled in South Africa to send money straight into EcoCash mobile wallets of friends and relatives.
The CZI said this year Zimbabwe had to “eliminate the external payment backlog” that was affecting procurement and supply of goods and services while the government had to “address the cost competitiveness” of the economy.