Confederation of Zimbabwe Industries president, Busisa Moyo
ZIMBABWE’S distressed companies defied odds to re-open after the annual shutdown last year, despite fears many would fail to resume operations due to a worsening economic environment.
Economists and business leaders had warned last year that a deteriorating economy, which had then witnessed the introduction of a new domestic currency called bond notes, would force many companies to close down during the start of the year.
During the hyperinflationary crisis, many companies failed to reopen after traditional annual shutdowns due to economic circumstances.
The Zimbabwe National Chamber of Commerce (ZNCC) had predicted that at least 10 percent of local firms would fail to reopen after the annual December shutdown, as a cash crisis that had wreaked havoc in the economy last year deepened.
Banks were failing to dispense cash or transfer funds for payments locally and abroad, resulting in companies failing to import raw materials.
The gridlock in payments, subdued demand, power shortages and wage increases were among the problems that affected industries last year, and hampered production.
Companies failed to service foreign commitments in time, while the domestic market was roiled by intermittent delays in the settlement of payments made through the Real Time Gross Settlement system.
ZNCC chief executive officer (CEO), Christopher Mugaga, had said last year applications for foreign currency allocations to the central bank by members were taking between two weeks and two months to be approved.
This had not only affected businesses, but had also frustrated their chances of returning to production this year.
He said foreign suppliers of goods and services had been forced to revise their terms with Zimbabwean firms.
“Ten to 15 percent of companies may not come back after the (annual festive season) shutdown,” he had warned. “Delays in payments have worsened their chances of coming back.”
But in an interview with the Financial Gazette last week, Mugaga said while firms were still operating under difficult circumstances, the chamber had not received reports of company closures.
He noted, however, that many of the ZNCC’s members were still failing to import critical raw materials and consequently failing to meet production targets.
Among companies affected by the current problems with international payments are producers of critical products such as fertiliser and cooking oil.
Other firms affected are in the automotive sector, which is generally regarded as a luxury industry, and could be on the tail end of a foreign currency allocation list put in place by the central bank last year.
Confederation of Zimbabwe Industries president, Busisa Moyo, said all their members had returned to business after the festive season break.
“Companies have opened,” Moyo said. “We haven’t heard of any that has failed to open so far. Companies are opening; they are coming back. Some of them are coming this week, some are coming next week and some are coming in the last week of January. So we are optimistic that none will stay shut. But should we get any that do not open, we will update you.”
Analysts said the survival of firms in this harsh environment may be due to the fact that they have adopted mechanisms to withstand the heat.
Government says about 4 500 firms closed between 2011 and 2013 alone with over 55 000 workers losing their jobs.
The Chamber of Mines of Zimbabwe (CoMZ) said it had not received reports of mine closures by last week.
It, however, warned that gold mines, which are not classified as exporters because they sell their bullion locally to Fidelity Printers and Refiners, could soon start experiencing viability challenges due to failure to access foreign currency.
Mining firms require foreign currency to import inputs such as explosives, machinery and other components.
“What we cannot debate is that production will be affected,” said CoMZ CEO, Isaac Kwesu.
“This may result in closures. It will also affect mining and general macroeconomic growth,” he added.