Zimbabwean industries will at least operate at break-even point for survival, according to the Zimbabwe Coalition on Debt and Development (ZimCODD).
The CSO says Zimbabwe’s manufacturing industry suffers from the fuel price increase.
“The scanty industry that exists in Zimbabwe will simply raise commodity prices implying an increase in inflation rate,” ZimCODD says.”With erosion of real incomes, consumption will typically go down due to reduced demand.”
“For the industry to survive, they will at least operate at breakeven further compromising their profit margins. The small businesses are the most affected.”
The development-oriented CSO discusses about the survival of Zimbabwe’s industry at a time when Old Mutual is reporting of investors fleeing the country’s markets due to harsh economic conditions since the beginning on the year 2019.
“In Zimbabwe, the equity markets remain volatile, decreasing 17% since the beginning of the year. Inflation reached 67% at the end of March 2019, reflecting the increased cost of imports,” Old Mutual says.
“Our customers’ in this market are impacted by the rising inflation and the resultant impact thereof on their disposable income levels.”
“On 20 February 2019 the Reserve Bank of Zimbabwe announced that RTGS had been recognised as an official currency and established an inter-bank foreign exchange market to allow trading between RTGS and other currencies. At the end of March 2019, the RTGS was trading at 3.01 to the USD dollar,” the company explains.
ZimCODD goes on to say that Zimbabwean companies will be forced to rationalize employment costs causing unemployment in the short run.
“The pressure for nominal wage increases further exacerbates the operating costs of businesses against falling demand,” the organization says.
“The current economic environment and the fuel price increase make the business environment in Zimbabwe very unfavourable for investment at a time when the country is desperate for foreign direct investment. This is evident across sectors.”
“As foreign direct investments continue dwindling, the tourism sector, for instance registered 3 new Foreign Direct Investments (FDI) worth US$6.4 million against US$78 million received during the same period in 2018,” the CSO went on.
Despite the challenges facing the country, the Zimbabwe Government believes that the country is doing right as it implements the Transitional Stabilization Program (TSP) to bring the nation’s economy on the right track.
Finance Minister Professor Mthuli Ncube, on a state run television, said the TSP is bearing positive results with Treasury having been able to register a running surplus of $100 million in the last four months to April 2019.