AT least 10 firms have been closing down every month since the beginning of the year, a senior official from the National Social Security Authority (NSSA) disclosed. This means at least 60 companies have closed shop since the beginning of the year, and that the count could get to 120 companies by year-end if the situation remains dire. This appears to indicate an acceleration of the economic crisis in the country characterised by a liquidity crunch that has seen domestic companies failing to recapitalise to deal with competition from cheap imports.
Plummeting disposable incomes and failure by the fragile banking sector to support industries has worsened the situation. The NSSA official indicated that their official data only reflected companies that had officially ceased monthly pension contributions because of closure. Many businesses have not been remitting workers' contributions to NSSA, although this is a crime in terms of the law. "About 10 companies are closing per month," the source told the Financial Gazette.
"NSSA's revenues, in terms of subscriptions are declining. Even after NSSA increased contributions, the impact on revenues has been very minimal because of company closures," said the source. The official could, however, not reveal how many jobs had been lost as a result of the company closures. Reports indicate that at least 1 000 companies collapsed last year, throwing 9 500 workers on the streets.
Official data shows that over 120 firms applied to the Retrenchment Board last year for permission to retrench, while more applications were lodged with the board by troubled firms that were planning to lay off over 1 500 workers by the first quarter of this year. "NSSA's revenues, in terms of subscriptions, are declining. Even after NSSA increased contributions, the impact on revenues has been very minimal because of company closures," said the source.
NSSA declined to give an official confirmation of the statistics. Speaking on behalf of NSSA, public relations consultant, Mike Hamilton, said: "Unfortunately NSSA does not provide this sort of information. It is suggested you try one of the government ministries or departments that deal with this sort of information, such as ZIMSTATS, Ministry of Industry and Commerce or the Ministry of Public Service, Labour and Social Welfare."
A survey by the Zimbabwe Congress of Trade Unions has indicated from the 1,3 million workers who were formally employed in 2012, only 1,2 million were in employment last year, highlighting the extent of the industrial crisis gripping the country's strife-torn economy. Another source from NSSA said the authority had registered subdued revenue inflows in the first half, even after hiking rates last year.
Zimbabwe's economy is expected to continue contracting in 2015, spelling doom for undercapitalised industries and worsened by deflationary pressures that have forced companies to report a slump in earnings. Agricultural, for long the backbone of the economy, has declined, while mineral prices lost significant ground in 2012 and 2013, piling pressure on the economy. Economic analysts predict that the situation could persist in 2015.
"Given the prevailing sub-optimal economic environment, we further forecast a further decline in capacity utilisation in 2014, as manufacturing companies remain under pressure from tight liquidity and competition from low-priced imports," said banking group, ZB Financial Holdings Limited.
"The level of company closures is at an alarming rate and it has generally come against a backdrop of declining industrial capacity utilisation, which worsened to an average of 39,6 percent in 2013 from 44,9 percent in 2012," ZB said.
"The much-needed foreign investment inflows remain thin... given the slowdown in economic activity across all sectors of the economy, the anticipated 6,1 percent real growth in Gross Domestic Product appears overly optimistic."
The ongoing crisis in industries shows that predictions by the Confederation of Zimbabwe Industries (CZI) four years ago that there would be no growth in Zimbabwe's economy until 2020. Real economic growth will only be achieved in 2020 when Zimbabwe's industries are projected to start surpassing crisis period production levels, the CZI said in 2010. "Full recovery-a return to the peak real per capita income levels achieved in 1991-would take about 12 years, assuming uninterrupted growth of five percent annually, from 2009 to 2020," said CZI.