April 10, 2015
In 2014, 150 companies in Zimbabwe were placed under curatorship and leaving nearly 4,000 workers without jobs as the country’s economy suffered from post sanction effects from western powers and bad politics locally.
The Reserve Bank of Zimbabwe further said that there are more “companies in distress” meaning more businesses could close or scale down this year as the country’s economy quickly informalizes.
In the “absence of significant improvement in economic activity, the fiscal position is expected to remain difficult in the outlook period,” fin24 quotes the bank saying in a report.
The bank said companies “are also failing to pay their staff on a regular basis, accumulating salary arrears,” a situation that has affected the country’s aggregate demand badly.
Zimbabwe’s economy nearly collapsed between 2003 and 2009 as the country, which was once the food basket of the continent, struggle with sanctions after the black majority forcibly evicted white-farmers from their land under President Robert Mugabe’s watch and support.
The economic woes have stayed with the Southern Africa country since and have made it difficult for companies to access inputs from outside the country, while a credit crunch has hurt their access to finance from lenders who are also suffering from high non-performing loans.
“Ease of doing business”
Zimbabwe has one of the most uncompetitive business environments in Africa and is ranked among the worst in terms of ease of doing business.
The country also remains unattractive to international financing largely due to a huge external debt estimated at over $11 billion. This has resulted in the unavailability of long-term cheap financing with the available short-term loans being expensive.
The market liquidity crunch has been cause by lack of foreign direct investment in the country, who see the hostile political environment by the ruling elite as a big risk to their business growth. Subdued consumer demand has also cast a dark shadow on the country’s investment climate.
“Foreign direct investment, which has a positive impact on market liquidity, remains subdued due to the perceived country risk,” the central bank said in the report, adding that “The country’s susceptibility to adverse international price developments” had affected its mining and agriculture led economy adversely.
According to a 2013 National Social Security Authority Harare Regional Employer Closures and Registrations Report, over 8,000 jobs were lost between July 2011 to July 2013 as 711 companies in the capital Harare closed down.
According to the Confederation of Zimbabwe Industries 2014 report, the Country’s manufacturing sector has also not been spared the rout.
“In 2014, average capacity utilization continued to decline, shedding 3.3 percentage points to 36.3%. Quite telling is the prolonged effects of power cuts and costs, liquidity challenges, low domestic demand and many others on the performance of the manufacturing industry,” says the report said.
Source: AFK Insider