The decline in performance by Zimbabwean companies is partly attributable to poor management by business managers, a top executive said on Friday. This comes after Fin24 reported that executives found to have been negligent will face jail terms when amendments to the country's banking laws come into effect.
Several companies have been liquidated or placed under judicial management in the past two years. Others are merely struggling along, with profits and revenues for even the bigger corporates taking a tumble in the past year.
This has mostly been blamed on worsening economic conditions in the country. However, Zimbabwe National Chamber of Commerce CEO Chris Mugaga blamed managers for failing to guide companies through clearing debts on their balance sheets and other management deficiencies.
"Industry is choked. It is choked because of legacies which include management deficiencies. (The) Quality of managers that are in Zimbabwe at the moment is so poor that they are clueless. They are looking for political salvation to run their companies instead of setting the pace," said Mugaga, a firebrand known for his candid economic views.
Zimbabwean executives and business leaders mostly shy away from criticising the government, but experts say there is a need for open criticism of government policies that affect their companies.
"Whenever after an investigation, it is established that a bank is unable to repay some or all of its depositors by reason of recklessness, gross negligence, fraud or other criminal conduct, then every director or other person who was knowingly a party to the carrying on of the business of that banking institution recklessly... shall jointly and severally be liable for any loss suffered by the depositors or the banking institution," the Zimbabwe Banking Amendment Bill, currently awaiting Mugabe's signing into law, reads in part.
Zimbabwe has been plagued by massive bank failures in the past few years, with insider loans, lack of protection mechanisms for depositors and corporate governance violations being blamed for the bank failures. The nation has also run up a debt overhang amounting to about US$10bn, most of it owed to international finance institutions and domestic lenders and companies.
Growth is a 'luxury'
Mugaga cited debt distress as one of the legacy issues that is choking Zimbabwean companies. Companies in the manufacturing and industrial sectors are also running on nearly obsolete equipment.
"Debt distress is also a major issue for Zimbabwean companies," said Mugaga. He added that managers have no clue how to address the debt on Zimbabwean companies' balance sheets.
As a result of this, most companies are now "struggling to remain afloat instead of pushing for growth". Growth at present is a "luxury" for most companies, said Mugaga.
Chamber of Mines of Zimbabwe CEO Isaac Kwesu recently said the country's mining sector is facing bleak prospects this year, with sluggish growth forecast for the outlook period.
"Our capacity utilisation (for industry and manufacturing) at the moment is slightly below 30%. In terms of the outlook, it can only either maintain that sluggish trend or it will fall marginally to around 27%," added Mugaga.