Where are we going?

HARARE - A litany of warnings from senior executives at listed companies is signalling that Zimbabwe’s economy faces significant mayhem for the next several quarters, with a recovery not likely to kick in anytime soon.

The slump has also pushed some companies to retrench, with many saying the prospects of Zimbabwe’s economic revival remain uncertain, indicating tough times ahead.

The warnings have come from a diverse range of businesses across the industrial spectrum, particularly those exposed to the complications of the turbulent Zimbabwean economy.

The companies’ reporting period has traditionally caused the Zimbabwe Stock Exchange (ZSE) to pick up.  As a result of the economic recession being faced by the nation, unemployment remains high while the majority continue to wallow in extreme poverty.

The equities market has been severely affected by de-listings and suspensions, as companies faced mounting viability challenges while dozens of companies are folding every weekly rendering thousands unemployed.

In the first quarter to March 2014, the market’s capitalisation slumped by $642,8 million to $4,56 billion as stock prices plummeted.

Leonard Tsumba, Dairibord chairman, said in the listed milk processor’s financial results that “the economic outlook for 2014 will continue to be challenging.”

Several companies, sensing a need for belt-tightening in this worrisome environment, have made sharp cuts in their work force.

“Concomitantly, business models structured around the past paradigms will fail leading to higher unemployment and company closures,” Tsumba warned.

He said only strategic rationalisation of business together with the other cost reduction measures going forward, will spur their business to return to profitability this year.

Richard Wilde, chairman of CBZ Holdings (CBZH), the largest banking portfolio by deposits, said “the need for long-lasting solutions to the funding challenges and the resuscitation of the manufacturing sector remains priority for the economy to register positive growth.”

Cigarette maker BAT’s chairman Kennedy Mandevhani said trading conditions have remained challenging “as the country continues to strive for economic growth and stability.”

Corporations learned the lesson during Zimbabwe’s recession that they need to make deep cost cuts very quickly when their revenues start to go soft.

Barclays’ chairman Anthony Mandiwanza said their hope is that “government’s economic policy framework will ensure a stable and sound economic landscape to support private sector ambitions which would see this economy reclaiming its rightful space.”

Global insurer Old Mutual (OM)’s Zimbabwe unit indicated that the country’s constrained operating environment is likely to persist on the back of subdued demand and shortages of cash.

The group’s chief executive Jonas Mushosho said Zimbabwe faced a “stagnant and shrinking economy.”

Nicoz chairman Albert Nduna said in his financials “growth prospects for the economy and the insurance sector in particular remain subdued.”

In the period under review, Turnall’s chairman Herbert Nkala reported that liquidity constraints were expected to persist in the medium to long-term.

Gregory Sebborn, chairman of Masimba Holdings, a listed construction company, said he anticipated that business conditions will remain constrained this year with continuing liquidity challenges.

“Politically, there are indications of moves towards a thawing in relations with some governments in the European Union,” Sebborn said.

“In addition, there are ongoing discussions with multilateral institutions, which are a positive indication of intent by the government.”

He warned that while these initiatives will not lead to a short-term uplift in economic activity, the real key driver will be government’s ability to harness financial resources required to kick-start  infrastructure projects.

“Mindful of the potential liquidity trap typically associated with government projects, the group will continue to participate in its construction projects,” Sebborn said.

“Where possible, the group will endeavour to participate in the creation of financial solutions for such projects without introducing unnecessary risk to the group.”

Most companies posted heavy losses — an ominous sign of accelerated economic decline.

Coal miner, Hwange Colliery Company Limited (HCCL), has registered a $44 million pre-tax loss.

HCCL, which is a critical component in Zimbabwe’s economic growth as it provides coal to fire industries as well as electricity generation, widened its loss to $44 million from the $4 million loss suffered in 2012 due to deteriorating economic conditions in the country.

Agriculture-focused financial institution, Agribank, also suffered its worst loss in the dollarised era, with the bank recording $9,2 million loss in the full year to December.

Other key companies and financial services firms which are critical to economic development and growth such as POSB, MetBank, Allied Bank, NMB Holdings, Turnall Holdings, First Mutual Holdings Limited and Zeco Holdings all recorded heavy losses in the period under review.

 

Comments (16)

There is nothing like a senior executive Mr Reporter, that's repetition. An executive is a obviously a senior person in an organisation.

dibango - 7 May 2014

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water - 7 May 2014

It appears the availabity of the US dollar is declining at an alarming rate, thus making it impossible to transact, meaning the country is not liquid, i believe we can flood our market with the South African Rand, though less in value against the US dollar, this is currency that will be accepted by our market, as South Africa is next door, Our government can liase with the South African government as it is no feasible now to release the Zimdollar to the market,, the country needs to come up with an alternative to complete the the Zimdollar statement . An acceptable alternative currency will give hope to the business community. The machine is running, but the oil level is going down, business is in dire need of a lubricant.

tichaona - 7 May 2014

Illiquidity is caused by the huge informal sector this what should be sdressed as nobody trust the System anymore. Also there is no diversity of listed entities on the ZSE. Two Counters making up 70 percent of all Market Capitalization which is unsustainable even in the medium term. There is no Efford to re-activate Mid-Caps on the market as major Shareholders just to suck all Shares at very ridiculous levels. There should be a moradorium that nobody is allowed to sell Shares on the market unless liquidity is restored and Shares reach levels above NAV. Also no diluting of Shares should be allowed below NAV. Companies such as RTG, TA, Dawn, ZBFH, Star Africa, Barclay's, RioZim, Bindura, are worthless on the market while others such as Delta are overtraded and overvalued by One Thousand Percent. Therefore Government should impose a special tax on Delta and Econet for redistributing the funds into Mid-Caps. The tax should be named the Monopoly Discouranging Tax.

Emperor - 7 May 2014

What goes round must come around. The chickens are too soon home to roost Patrick and your gang of thieves. 'God aint blessing Zimbabwe until we get our shit uptight.' What the country needs is confidence. Unfortunately that does not lie in the economic sphere any more but instead resides in the political system. Unfortunately you are too slow to learn Patrick. The world is globalised and one of the first lessons is that investments destinations immediately become many. You cannot go around the world attracting attention for the wrong reasons like a spoilt child any more. The world owes you nothing. In fact it demands that you conform or perish. Simply behave or else nothing comes your way. You cannot even build a coalition of the baddest with people like Malema and expect to attract investment. It does not matter that you manipulate the AU to become its deputy chairman. Worse still if you steal elections this is what happens Mr. Chinamasa. Globalisation has its own demands, which demand that you conform or you perish. Resign Zanupf! Resign Mr. Mugabe! Resign zimbabwe cabinet! Resign Parliament! Resign the CIO! Resign the Service Chiefs! Resign the traditional leaders! Resign war veterans! Resign dictatorship! Resign and save the country.

itayi gwenhure - 8 May 2014

Is there anywhere we are going at all?

Semhalo - 8 May 2014

We are going ku indigenization

Mukanya - 8 May 2014

Is there anywhere we are going at all?

Semhalo - 8 May 2014

latest SA elections ANC 4 288 912 0 62.11% DA 1 641 506 0 23.77% EFF 318 183 0 4.61% IFP 158 740 0 2.30% NFP 105 206 0 1.52% UDM 71 489 0 1.04% VF Plus 71 059 0 1.03% COPE 54 911 0

khjdhfyer - 8 May 2014

ndopaunonzwa ECONET yoti maBundles ako aExpire,kuti uzvifunge kuti mari yonzi inoExpire neEconet unobva watoona kuti mumusoro ndomava kutozungaira

me - 8 May 2014

why are you calling a certain sector informal why not formalising it this is why you are not gettiing tax rebats from this sector.plus ngoda dzapera ne machaina,ne manaigerians ne maarabu mudhara akarara kokuzororawo kana machembera.takadzidza-takadzidza ndokudzidza kwacho muchibirwa makatarisa masikati machena.zimbabweana wake up chinjai maitiro n

ndizvo - 8 May 2014

its because there is no economy to talk about in Zim. Where do banks get deposits whilst the depositors dont have enough to feed their bellis. Good governance and right policies can lessen this crunch

tobaiwa - 8 May 2014

Itayi Gwenhure. WELL SAID, there is no other way out of this hell house we find our selves in.

Ronaldos - 9 May 2014

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samuel - 9 May 2014

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