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Comment: Zero Growth

WE are in reporting season again for companies quoted on the Zimbabwe Stock Exchange.


Results published to date are reflective of the general malaise in the economy –– massive growth in zeroes.

All companies which have published their figures to date have registered phenomenal growth in profit before tax and profit attributable to shareholders. Basic earnings per share have seen astronomical increases together with shareholders funds.

Companies’ balance sheets have also ballooned as firms have taken to revaluing assets to keep up with inflation. The huge figures on the accounts –– with increases as high as 3 million% –– do not in most instances represent any real growth in quoted companies’ core business.

The figures have little to do with real performance. Basic metrics will show that in a number of counters, the huge figures actually show operating losses which would have fed right down to the bottom line had it not been for meticulous fair value adjustment to investments and other assets.

For many companies, the asset manager has become more important than the colleagues in operations.

Banks which have made phenomenal growth have in real terms shrunk substantially to the extent that their combined strength today is inadequate compared to capital requirements of the manufacturing sector.

Building societies cannot provide mortgage finance for real estate developments while insurance companies have resorted to raising funds from operations across borders to provide the little cover to local institutions and properties.

All companies in these sectors, including factories whose plant and equipment have been cold for the greater part of the financial year, will announce profits and growth.

It is business gone awry. But, the quadrillions and quintillions have become fodder for bureaucratic propagandists who see economic growth in the figures. Figures are deceptive and the hyperinflationary environment has created a false sense of wealth to investors who are reaping huge gains on the Zimbabwe Stock Exchange daily. The story of growth on the bourse has become a soporific ode whose discordant refrain is at variance with the real state of this economy.

Companies which have recorded huge gains are however aware of the parlous state of this economy. This is amply demonstrated in commentary annexed to sets of accounts. A glance through board chairmen’s statements reveals that business is clamouring for revolutionary change in policy.

Albeit sounding coy in censuring government, big business knows where the problem is. CBZ’s Richard Wilde had this to say about government policy: “There is however need to urgently put in place and implement policies that help shore up investor/business confidence in the economy.

“Among other policy measures, there is need to undertake policy review with regards to price controls as these are creating arbitrage opportunities thereby fuelling the parallel market.

The removal of price controls in addition to the engagement of the international community for balance of payment support will go a long way in boosting market confidence.”

FBC Holdings chair Herbert Nkala in his statement concurred, saying his “group looks forward to the implementation of a package of robust policies and unity of purpose that will engender progress and success for the country”.

One would be quick to dismiss the aspirations of business as the same old record stuck in a groove but the cry for policy review is indicative of serious institutional weakness which has taken hold in this country. In the rebuilding process, restoring institutional vitality is important.

The rebuilding stage of this economy will inevitably involve restoring the physical infrastructure and providing humanitarian relief and reliable utilities.

Parallel to this should be a deliberate plan for domestic decision-makers, business leaders, social actors, and international donors to come together to recreate institutions requisite for a more positive future.

We share the sentiments contained in recent paper by the Center for International Private Enterprise, an affiliate of the US Chamber of Commerce.

It said: “In the absence of such broad-based social involvement in day-to-day political and economic decision-making, a true market economy fails to develop, and corrupt crony capitalism takes its place, with a handful of special interest groups monopolising access to policymakers and manipulating the game to their own advantage.”

This is where we are as a nation today and it’s reflected in the myriad bonehead policy decisions which have seen the growth in zeros and little else.


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