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Harare – Zimbabweans are increasingly feeling the pinch of the country’s economic struggles, with 3 881 formally employed workers being retrenched and nearly 150 companies being placed under curatorship and judicial management in 2014.
Once the breadbasket of the southern African region, Zimbabwe is struggling, with productivity in the country’s economy nose-diving. Several companies are closing shop or massively scaling down and the economy is fast informalising, say experts.
Now, the Reserve Bank of Zimbabwe (RBZ) has painted a bleaker picture of the country’s state of economic affairs. It said on Tuesday that “companies in distress are also increasing”, and added that in the “absence of significant improvement in economic activity, the fiscal position is expected to remain difficult in the outlook period”.
Meanwhile, the SA rand – which traded at around 11.84 against the greenback by Tuesday afternoon – is expected to remain at levels around R12/$ in 2015, the Zimbabwean central bank said. This would “continue to dampen inflationary pressures in the domestic economy”.
As a result, Zimbabwe’s economy is expected to continue in deflation this year. Economists in the country said on Tuesday that the weakness of the rand was a blessing and a curse for Zimbabwe.
“Continued weakness will mean lower priced inputs and raw materials which are imported from South Africa. However, a weak rand also has problems for Zimbabwe as there will be problems with pricing of the informal sector commodities we mainly export there,” said an economist at a Harare based economic research and brokerage company.
Zimbabwe’s economic difficulties have precipitated company closures. The central bank said the growing cases of company closures in the country were attributable to “economic bottlenecks” such as the liquidity crunch and the attendant lack of credit, obsolete equipment, low aggregate demand, cheap imports and non-performing loans.
A significant number of companies in Zimbabwe “are also failing to pay their staff on a regular basis, accumulating salary arrears,” a situation that had “adversely” impacted on aggregate demand.
“Foreign direct investment, which has a positive impact on market liquidity, remains subdued due to the perceived country risk.”
Zimbabwe’s strongest sector, mining and agriculture is experiencing subdued commodity prices, with tobacco farmers and merchants disagreeing over pricing and quality.
A bad farming season is also expected to further compound the country’s food security situation, forcing it to import from neighbours such as Zambia and South Africa.
The mining sector is hobbling, with mineral prices projected to continue on a subdued trend. Platinum miners in the country are reportedly shelving expansion plans, a situation expected to impact on future productivity and executives in the industry have blamed lower metal prices and an unpredictable investment climate.
“The country’s susceptibility to adverse international price developments underscores the need to beneficiate minerals produced in Zimbabwe,” the central bank said in its report.
