Zimbabwe: Country Must Start Believing, Again

editorial

Big business is dying. Corporates are caught in a negative flux in which they have been forced to downsize their operations or to apply for liquidation. There is resizing across all sectors and retrenchment is the new game in town.

These are signs of an economy heading towards a precipice.

Equity investors are in a difficult situation. The Zimbabwe Stock Exchange has been in a free-fall forever and is fast losing value.

The bourse is losing its lustre in the region and the bad news is far from over. Apart from macro-economic troubles like the slowing economic growth and mounting budget deficit, a sharp decline in capacity utilisation in industry, company closures and the attendant increase in unemployment, have of late opened up another avenue of woes for Zimbabwe.

The stock exchange is often a mirror of the whole economy and investors use the quality of listed counters as a key measure to determine whether or not to invest in a country.

The country is currently witnessing companies not only dropping off from the exchange, but stocks of the bulk of those that have remained on the bourse are not trading at all. Many of them do not deserve to be listed and will be forced to delist.

Trade has remained concentrated in the top five listed companies which now account for almost 75% of the bourse's turnover.

With no new money coming into this economy, red lights have already started to flash on the government revenue board. This week the Zimbabwe Revenue Authority (Zimra) announced revenues for the last quarter were at US$877,6 million; 18% short of the projected US$1,1 billion.

Zimra said collections from corporate tax were dwindling due to "reduction in industrial capacity utilisation from 44,6% in 2012 to 36,6% in 2013" and the "general economic slump which has limited expansion of business towards income generation".

The forecast for 2014 is not looking good as Zimra expects revenue to drop significantly this year if the current environment persists. In the face of falling revenues, government has agreed to adjust civil servants' wages, a further burden to the fiscus. To get more revenue, the state will seek to tax corporates and individuals more to feed the bureaucratic beast.

This discordant refrain appears unending as Zimra, in its half-year results last year, said the first half of 2013 had seen the Zimbabwean economy being characterised by "liquidity constraints, power shortages, retrenchments, scaling down of operations and company closures, among many challenges".

Nothing much has changed since then and in fact the situation is deteriorating by the day as reflected by activities on the ground.

These cost-cutting efforts are impacting on businesses, both big and small, which provide the goods and services used by the big manufacturer resulting in further contraction down the chain. More worryingly is the debt trap which has ensnared most corporates.

It's time to adopt confidence-building measures like reviving the honest dialogue among all stakeholders to remove uncertainties. There is a real need to reduce misperceptions and mistrust and increase confidence between state and non-state players. Zimbabweans should start believing in themselves again.

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