The business community seems to be losing confidence on the New Dispensation that has been promising to change the economy of the country for the betterment of Zimbabwe’s well-being. Zimbabwe’s Business Confidence Index (BCI) for the first quarter of 2018 has slumped to -14,4 quarter-on-quarter basis from positive 5,8 in 2017’s 4th quarter according to Confederation of Zimbabwe Industries (CZI) survey. The slump from the positive BCI in the last quarter of 2017 to a negative figure in the first quarter of 2018 takes place as amid challenges concerning foreign currency, liquidity and also allegations of slow speed in the implementation of policies. This commentary looks at why the business community is losing confidence in the New Dispensation and the three reasons are given below.
Foreign Currency
One of the reasons why businesses are losing confidence in the new administration that took over Zimbabwe during the end of last year at the last quarter of 2017 is the continued foreign currency shortages in the country. When the current government took over the country in 2017, Zimbabwe’s President promised top reform the current using the “open for business mantra” hopes for change could have been high boosting confidence. CZI states that the inaugural speech as well as the National Budget the National Budget by the Minister of Finance boosted the confidence.
“The new dispensation coupled with His Excellency, President Emmerson Mnangagwa’s inauguration speech as well as the National Budget presented by Minister of Finance Honourable Chinamasa has boosted confidence,” CZI states.
CZI states in explaining the 5,8 BCI of the 4th quarter in 2017. The confidence that was boosted was then lost as companies are finding it hard to access foreign currency. Companies, in their annual reports of 2017 are stating that lack of foreign currency is dragging production down. CZI also gave lack of foreign currency as the reason why confidence has gone down.
“What motivated this pessimistic result was that most manufacturers have been failing to get foreign currency for their operations to a point where their production has been greatly affected. Almost every manufacturer we surveyed complained that they were receiving little or no foreign currency so I would say it has been mainly due to foreign currency shortages,” CZI President is quoted in a local newspaper.
“Since around September last year, the currency challenges have been taking a toll on industry and this really needs to be addressed.”
If the current administration wants to boost confidence among the business community, then there is a need to solve the foreign currency shortage issue.
Slow Pace in Policy Reforms
Companies are waiting for reforms to improve the economy of Zimbabwe as well as the business atmosphere. In the Proplastic Limited 2017 Annual Report Chairman of the company Gregory Sebborn said;
“We witnessed significant political change towards the end of the year, with a new administration promising to revitalise the economy through a raft of policy reforms. We hope that these intended reforms will materialise so that economic activity improves,” Sebborn says.
This implies that the companies really need these reforms. However, bills such as the Mines and Minerals Bill and the Companies Bill are still being finalised. Slow implementation of policies leave companies using laws that are said to be outdated and not in correlation with the current era. CZI, last year, predicted that delay in the implementation of policies would result in the next period.
“To maintain confidence and improve the situation in industry, implementation of the stated policies and strategies should commence immediately. Further delay will result in reduced confidence in the coming period” says CZI in the 2017 BCI.
Speedy implementation in policy reforms will help reduce some problems in the economy and help the business community boost confidence in the New Dispensation.
Cash Shortages
One of the challenges that have persisted and could also be even reducing confidence among the ordinary citizens is cash shortages. Companies have been complaining that workers are wasting valuable time waiting for cash on bank queues. Minister of Finance agrees that there is no confidence as people are keeping money at their homes
“There is no confidence in our economy. The main illness of our economy is lack of confidence and trust,” Chinamasa is quoted.
Business Confidence Index
The BCI measures the amount of optimism or pessimism that business Managers feel about the prospects of their companies or organizations and is constructed by summing unweighted five indicators given equal weight which include, economic situation of the establishment; the manufacturing sector of the establishment; Economic situation of the country; Investment; and Profitability according to CZI. The Index fluctuates between -100 and 100. A positive value of BCI indicates business optimism and a negative value indicates pessimism and a value of zero neutrality.
