HARARE - The year 2015 proved to be a very challenging year not only for companies but for individuals as well. And in the absence of strong economic reforms and the impending drought, the situation is expected to deteriorate further this year.
Our Business Editor John Kachembere (JK) speaks with the Zimbabwe National Chamber of Commerce (ZNCC) chief executive Christopher Mugaga (CM) on business expectations for 2016. Below are excerpts of the interview.
JK: Last year was one of the most difficult years for business, what is your expectation for 2016?
CM: Indeed 2015 was a year to quickly forget notably as business, it is pertinent for us as a nation to swallow the pride and know that 2016 cannot become a better year simply because it was prophesied in one of the church gatherings.
We need concerted efforts to change the way we do business if our expectations for 2016 are to be positive. Given the structural bottlenecks as well as openness of, the Zimbabwean economy to products and services from the world markets, I am afraid to say 2016 can be a tougher year for us as our companies will continue feeling the heat from dumping off, as much as banks aggregate profit is on the rise, it’s mostly non-funded which will make the entire strategy unsustainable.
JK: From a business perspective, what can be done to improve the economic situation in the country?
CM: To improve the economic situation, I believe the government has to quell the crisis of mistrust within our system. Politicians mistrust each other more than ever before whilst they are the custodians of policy proposals, this therefore leaves a void when it comes to thoroughness in implementation.
It is also vital to find feasible strategies to look for foreign direct investment without necessarily relying on “carrot approach” of relying on incentivising potential investors.
Let the policy environment be transparent and consistent while relegating populist policy measures to the dustbin, for example, what is the rationale of even considering giving bonuses both to the civil service and the private sectors when numbers are pointing southwards.
As a chamber, we also believe it is high time the government should give much prominence to the business, for instance most of the Memoranda of Understandings (MoUs) being signed by politicians should actually be assented to by the business representatives.
JK: Government last year predicted the economy to grow by 2,7 percent this year, but with a devastating drought on the way, is this target still achievable?
CM: A target of 2,7 percent is a bit too ambitious, in fact if we had set our growth rate around 1,2 percent, I am confident it was going to improve policy profiles we proffer with full knowledge that any expectation beyond two percent is unachievable.
The drought, power outages, trade policies which do not suit the new emerging economy, debt distress on most companies’ balance sheets, the threat of NPLs as it is clear that ZamCO will only pursue secured loans are all pointers to a gloomy 2016.
The major challenge for us as business comes when we ponder about meeting 2,7 percent GDP growth target with full knowledge that the growth figures for 2015 could have been in the negative. We also have a challenge with stats coming from both IMF and World Bank regarding growth targets in Zimbabwe as it appears most of their assumptions are over-simplified.
JK: In his 2016 National Budget statement, the Finance minister Patrick Chinamasa introduced a raft of measures to increase revenue such as increasing traffic fines, what’s your comment on this?
CM: Through raising traffic fines the government has just raised the “kung fu” game of shooting itself on the foot. This is a direct case of raising non-tariff barriers while at the same time raising the cost of doing business.
With no active rail network, levying such fines is tantamount to either elevating corruption or losing confidence with Chinamasa’s office given that it appears such fines are a fund raising measure to run a parallel department which in this case is the police force.
As business, we hope government will see the light and reverse such a diabolical stance which can only help to worsen the poverty condition of the already struggling business and citizens.
It is also our concern that government gets so fixated on raising fines without addressing the elephant in the room which is corruption, a number of people are either driving without licences or are forced to pay large sums of money in order to acquire a driving licence, instead of penalising one who is driving without a licence while ignoring the one who is making getting a licence a torrid experience is quite an unfortunate development.
JK: Zimbabwe is trying very hard to clarify the Indigenisation Act, but the recent gazetting and subsequent withdrawal of the amendments seem to add more confusion to the policy, what is your comment on this?
CM: What is making the Indigenisation Act even more confusing and complex is the number of times the law is being altered over a short period.
As we always called for as business, the Indigenisation law should never be allowed to be a one-size-fits-all piece of legislation, once we attempt to do so, the consequence becomes endless amendments which will bring a strange piece of law at the end.
What makes companies fear the indigenisation law more is the lack thereof of implementation which has seen the government introducing a levy of 10 percent for failing to comply?
A detailed research should be carried out on the reasons why some companies are failing to comply instead of reading the riot act to them. In this boundary-less business world, capital flight can be a result of perception not reality.
It does not help anyone to threaten companies which are yet to comply, let us do an assessment to determine if they are any barriers to compliance and find solutions which are mutually beneficial for the concerned company, its employees since it can lead to job losses as well as to the government.
JK: What plans, if any, have been put in place by ZNCC to ensure that companies get offshore loans at concessionary rates for retooling?
CM: As a chamber, we are working around the clock to unlock funding for a number of companies — members and non-members.
We are negotiating with some local banks for syndicated loan facilities to a number of companies whose credit worthy might not attract the desperately needed funding. In the process, we are bridging ways in which the facility can be adequately collateralised by the pooled resources of the concerned companies.
A number of initiatives with foreign chamber of commerces is also on the cards where companies from our side are paired with fellow companies from sister chambers. This deepens the joint venture initiatives, public private partnerships as well as build-own-operate and transfer initiatives.
Getting loans at concessionary rates has not been a walk in the park given the sovereign risk we are exposed to. However, we continue negotiating with different financiers from across the international community, it is significant to appreciate that the crisis does not solely lie in financing because a number of companies within the country are still operating on Zim dollar business models and this means they cannot deliver significant returns even if funds are advanced due to a number of factors which are non-financial but will leave them in debt distress.
Going forward when you hear ZNCC calling for relations to be normalised with Bretton Woods institutions, the basis will be the experience we go through in organising funding facilities for different Zimbabwean companies.
The IMF and World Bank are so influential that even a hint of doubt they can cast about the Zimbabwean economy even without facts to support their assertions may require a decade if not more to correct.
JK: Zimbabwe has been experiencing acute power outages in the last few years thereby affecting production in the economy. From a business point of view, how can the power situation in the country be improved?
CM: Firstly, it is important to appreciate that power shortages are a common phenomenon in Africa. Africa currently has 147 Gigawatts of installed capacity, a level comparable to the capacity that China installs in one to two years.
The continent is said to be in need of adding around 300 Gigawatts of capacity between now and the next 10 years to meet growing demand.
This therefore means the Zimbabwean government has to find funding models which will allow for investment in new power generators as there has been decades of dilapidation in infrastructure which was established under Rhodesia. The Chinese model of investing in power generation needs copy and paste back home which means most of the MoUs we are entering into with China should have a bias to energy and infrastructure than the end of the market.
As much as solar is advisable, the belief is Zimbabwe already has potential and capacity to bring up the installed capacity to 3 000 MW which will meet the existing demand.