WHEN the Zimbabwe Independent first hit the streets in 1996, it attracted a number of high-profile advertisers.
These included National Discount House, Beverley Building Society (now CBZ Building Society), Gestetner, Cuthberts and Brentoni.
Some of the companies which advertised in the first edition of the Independent on May 10 1996 included Dunn & Bradstreet, Thacker Personnel, Global Business Assignment, Business World Employment and Hallmark PR (Stan Higgins is now Aquarius).
CABS and Old Mutual also advertised, but they are not featuring in this 20th anniversary edition. PG and Mazda are also absent.
As it turns out, 20 years on most of these companies are no longer operating. The firms have downsized, disinvested or shut down mainly due to the harsh operating environment in Zimbabwe which decimated the Zimbabwe dollar during the record hyperinflation era.
The company closures, which have quickened over the years and are intensifying, have led to serious de-industrialisation, job losses and rampant unemployment.
In the first quarter of 2016 alone, 81 companies closed shop according to statistics availed by the Zimbabwe Congress of Trade Unions (ZCTU).
ZCTU secretary-general Japhet Moyo said most of the closed companies were from the hotel and catering, mining and engineering sectors.
This adds to the closure of 4 610 companies between 2011 and 2014 which resulted in the loss of 55 443 jobs as indicated by Finance minister Patrick Chinamasa during his 2015 budget presentation.
According to statistics presented by Chinamasa, the tourism sector was the hardest hit with 2 142 companies closing during the three year period. A total of 18 413 jobs were lost as a result. In the manufacturing sector, 458 companies closed while 9 978 jobs were lost during the same period.
The construction sector was not spared with 317 companies closing shop during that period resulting in the loss of 3 651 jobs, while 368 companies in the agricultural sector closed down affecting 5 465 jobs.
Only last year the world’s second-largest mining company Rio Tinto, a British-Australian multinational metals and mining corporation headquartered in London, exited Zimbabwe after a 60-year presence in the country.
Rio Tinto Zimbabwe, which was involved in diamonds mining, announced its exit at a time government was planning to merge diamond companies into one company the Zimbabwe Consolidated Diamond Company, 50% owned by the state.
The shutting down of operations by Rio Tinto — a vote-of-no-confidence in Zimbabwe — compounded investors’ confidence crisis in the local economy. The situation is exacerbated by political instability and uncertainty, policy inconsistences and a hostile business environment.
Chinamasa has attributed the company closures to a number of economic bottlenecks such as expensive capital resulting from a high sovereign risk, high labour costs and obsolete equipment.
Former Finance minister Tendai Biti estimates that more than 6 000 companies have shut down with at least 300 000 workers losing jobs since 2012.
The effect of this on government revenues has been devastating. Tax collections, including Pay-as-You-Earn revenue, continue to plunge, according to a first quarter report of 2016 by the Zimbabwe Revenue Authority chairperson Willia Bonyongwe.
Bonyongwe said last week companies owe Zimra US$692 million in income tax, up from US$578 million last year.
“This largely reflects the incapacity of most companies to pay, some of which may no longer be operational. In the short term, this tax head will remain under pressure and performance is not expected to improve all things remaining equal,” Bonyongwe said.
She said individual tax collected in the quarter amounted to US$167,43 million which fell short of the targeted US$196 million and a further reduction to the US$200,18 million collected during the same period last year.
She added that value-added tax on imports and customs duty both dropped by 1% to 12% and 9% respectively. Corporate income tax contributed US$52,55 million which was a miss on the targeted US$76 million.
Government is feeling the pinch of company closures as it now struggles monthly to pay its 550 000-strong workforce. Official figures show that the public sector spending accounts for 83% of total revenue.
Only significant levels of investment can halt the wave of company closures and job cuts, according to economist John Robertson.
“There is need to make the country more attractive to investors and for government to change some of their policies, including indigenisation,” Robertson said.
Government, according to the country’s largest labour union, should uphold the rule of law, protect property rights and work to attract foreign direct investtment.
“Government is concentrating on labour market flexibility to lure investors which is wrong. What investors want is security of their investment,” Moyo said.
“If you ask an investor to determine their own wages they will give workers, but fail to assure the safety of their investment they will not come to the country.”