Business

Zim firms plunge into turmoil, now in survival mode

PHILLIMON MHLANGA

Most companies listed on the Zimbabwe Stock Exchange have published lukewarm results as firms shift into survival mode due to challenges confronting the economy.

The past week has seen some companies releasing sets of results reflecting on the turbulent economic environment that has seen some companies scaling down while others are teetering on the brink of collapse.

The restructuring efforts by companies are failing due to a very difficult operating environment characterised by severe liquidity constraints, foreign currency shortages compounded by rising operating costs, high inflation, local currency volatility, industry capacity decline, sharp reduction in disposable incomes following the reintroduction of the Zim dollar, combined by fuel and electricity challenges.

Several industry players told Business Times this week that the number of monetary and fiscal policy measures implemented recently have a material impact on the operating environment, which has remained fragile and uncertain, making it difficult for businesses to implement their growth plans.

Currency depreciation and rising inflation and interest rates will have a negative impact on businesses, they say, pointing out that many companies are struggling to put in place strategies to mitigate the impact of the associated risks. “We are in survival mode,” Josphat Sachikonye, the chairman of Dairibord Holdings said.

“Critical for survival is cost reduction and efficiency improvement initiatives to mitigate inflationary pressures, reducing foreign currency liabilities and limiting borrowings to support critical supply and demand requirements, and optimising the operating cycle through reviewing credit terms to align with emerging trends, and also developing export initiatives in the region.”

Ron Mutandagayi, the group chief executive officer of ZB Financial Holdings agreed, saying: “What is key is to survive in this very difficult operating environment. The group faces a real risk of balance sheet contraction in this highly inflationary environment.”

Another business leader, Washington Matsaira, CABS chairman, said: “The risks … in Zimbabwe have further escalated. In addition to the adverse elements linked to foreign exchange shortages and the relationship between income and expenses under inflationary conditions, drought and power shortages have emerged. It is vital that all stakeholders play their part to stabilise and strengthen the platform on which a strong and sustainable business can be built.”

Hebert Nkala, chairman of FBC Holdings said: “The operating environment remained challenging. Inflationary pressure remained a cause for concern and its effects have been felt across the economy as evidenced by the general increase in the cost of doing business. The increase in prices of goods and services is largely being driven by the adverse movement in foreign exchange rate.”

The CEO of the country’s biggest brewer, Delta Corporation, Pearson Govero, who is also board chairman of African Distillers Limited, said that the “macroeconomic conditions continue to deteriorate, further reducing consumer disposable incomes and compromising production.” — Business Times

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