Zimbabwe

Nearly 100 Zimbabwe companies close down

17 February 2019 - 00:33 By RAY NDLOVU


At least 96 companies have shut up shop in the 15 months that President Emmerson Mnangagwa has been in office.
The closures, at an average rate of more than six a month, undermine Mnangagwa's repeated pledge that under his watch, "Zimbabwe is open for business".
A tally, by the master of the high court, of companies either in liquidation or placed under judicial management shows that those that closed were in sectors including transport, agriculture, manufacturing, engineering and financial services.
Twenty companies closed in the month Mnangagwa took over, November 2017, and 13 the following month. The largest number of closures in 2018 was nine, in May.
Signs point to further trouble for businesses. Foreign currency shortages persist and it was revealed this week that hyperinflation has taken hold. Prices rose 56.9% last month, up from 42% in December. The international data and forecasting group Trading Economics expects inflation to reach 70% by the end of March.
Brian Mataruka, head of business rescue and insolvency at Harare law firm Gill, Godlonton & Gerrans, said the trend of company closures would continue.
The crisis adds to the pressure on Mnangagwa's government from the international community, which was angered by last month's army-led crackdown on protests.
On Thursday, the European parliament said it supported an extension of sanctions against Harare. The EU foreign ministers discuss the matter tomorrow.
Reserve Bank governor John Mangudya, who has delayed his monetary policy statement for several weeks without explanation, told the Sunday Times he would deliver it "before the end of this week".
There is pressure from business for a move away from US dollars as a trading unit to either the rand or a new local currency. But tobacco farmers want to be paid in dollars when the marketing season for Zimbabwe's largest cash crop opens next month.
Companies are upset over the $800m backlog in foreign exchange payments as a result of the central bank not allocating forex for their operations, according to the Confederation of Zimbabwe Industries.
Lucky Mlilo, the president of the Professionals Business Association, said the central bank was under a lot of pressure.
"Urgent solutions are needed to revive the economy. We need direction," he said.
Neville Mandimika, a Rand Merchant Bank economist, said a local currency was vital. "The critical issue is how it's introduced. There are various steps that must be followed to ensure that the currency will be accepted as a store of value," he said.
"The most important is ensuring the economy has adequate forex reserves. At this stage, the reserves simply aren't there."
Finance minister Mthuli Ncube is in favour of a local currency.
The central bank was forced to issue a statement this week denying plans to reintroduce a local currency. It was sparked by a tweet from former finance minister Tendai Biti saying a local currency was imminent.
On Friday, Biti said: "They have backtracked after I exposed them, but introducing a new currency without any backing of reserves is not the solution right now. What Zimbabwe needs is a currency backed by strong reserves."
In an interview with the Sunday Times, Biti said the bond note should be demonetised. "They should reverse their fiction that the bond note is equal to the US dollar," he said.
"They also need to ring-fence people's savings in the banking system. They should strengthen the multiple currency regime, they should abandon the policy that all exporters surrender their export earnings to the government."

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