13 April 2014

Zimbabwe: More Company Closures Loom

GOVERNMENT's failure to pay suppliers for goods and services rendered will continue to result in more company closures for the next three years, delegates at the Zimbabwe Accountants Conference heard last week.

This comes against the background of treasury's shrinking revenue base and increasing inability to pay suppliers.

The Zimbabwe Revenue Authority (Zimra) recently issued out a warning to the market to brace for tougher times ahead, as more companies fail to meet their statutory tax payment obligations.

In a presentation at the Conference held in the capital, former Delta chief executive Joe Mutizwa provided postulations for the next 12 to 36 months.

"Payment defaults will have a domino effect. Right now there is a payment system gridlock underway as government can only service 7% to 8% of the total supplier bill. The chickens are coming home to roost," he said, adding that suppliers will continue to collapse with this impacting on the tax base.

He said consumer spending would continue on a downward spiral, despite improved agricultural sector performance while unrelenting pressure from imports will continue unabated in the face of a weakening rand.

"Issuing of import licences is likely to unleash a torrent of corruption as witnessed in the 80s. Business restructuring will increase, liquidations will spike as government fails to pay suppliers for goods and services rendered," said Mutizwa.

Government plans this year to regulate the importation of goods by issuing import licences to businesses and individuals on a "case by case" basis.

He pointed out that the informal sector was strong but this was not a long term solution to the financial problems bedeviling the country.

"It does not have the depth to sustain an economy," Mutizwa said.

In his presentation titled, Rethinking business models to capitalise on emerging opportunities, Mutizwa said Zimbabwe was poised for better times at least in the next 15 years.

The rapid adoption of digital technology in the country will have far-reaching consequences for the economy in the coming years, delegates heard.

"There will be the emergence of winners-take -all economy in ICT and financial services driven by digitalisation of more information and services," he said.

Mutizwa said during that time period, the regional drive for economic integration will gather pace as the agenda within Sadc will shift from politics to economics.

"Zimbabwe's relations with the rest of the world will have changed in 15 years. Zimbabwe will be more stable than South Africa as Pretoria has many unresolved issues," he said.

He urged companies to focus on core business as there is too much portfolio conglomeration arising from the days of hyperinflation and price controls.

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