'Zim firms should target regional markets'

HARARE - Local companies have been warned to pursue new strategic thrusts and enter new fronts to remain viable in the wake of the current liquidity crisis and policy uncertainty affecting growth and investment.

Economic experts say smaller companies need to consolidate operations to improve viability through economies of scale and synergies achieved through common administration platforms, access to common sales channels and access to management with good track records to cushion themselves against a depressed economy.

Stockbroking firm IH Group (IHG)’s corporate analyst Vikesh Goran noted that listed Zimbabwean firms have for the past few years been posting poor results and there was need to pursue regional synergies to build and grow markets to remain viable.

“For medium-sized to larger companies with some sort of capital resource, joint cross-border ventures, in regional markets could be another mechanism to help in staying afloat,” Goran said.

The ZSE posted depressed results in the first half of 2014, with the benchmark industrial index retreating 7,7 percent to 186,56 points in June from 200 points in January.

Analysts also renewed calls for government to implement new policy shifts to spur investment and remove constraints to economic growth and protect existing jobs.

“As profitability declines, companies are being forced to rationalise or shut down thereby shrinking the tax base and raising unemployment… the country now requires constructive policy shifts in order to become a competitive destination for investment into key sectors that can reinvigorate economic growth,” Lloyd Mlotshwa, IHG’s head of sales said.

The advice follows Finance minister Patrick Chinamasa’s statement, halving the country’s 2014 GDP growth projection from 6,1 percent to 3,1 percent, which reflects poor economic performance, low investment confidence and prevailing liquidity challenges.

According to Harare-based research firm, Econometer Global Capital, on an annualised basis, the Gross Domestic Product (GDP) growth for the first half of 2014 averaged 1,8 percent with the major drivers in abyss.

The firm recommended significant review and restructuring of, “the current indigenisation and economic empowerment model to allow convergence with both regional and economic treaties and conventions. (And widening) the presumptive tax base in order to discourage proliferation of the underground economy which manifests as small and medium enterprise sector.”

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