AS the country’s liquidity crunch worsens due to the shortage of foreign currency and the fall in the value of bond notes, prices of most products have increased with the black market resurfacing. Business reporter Kudzai Kuwaza (KK) spoke to the Zimbabwe National Chamber of Commerce (ZNCC) president Divine Ndlhukula (DN) to discuss the sudden spike in prices, the acute shortage of foreign currency and the ZNCC’s expectations from the 2018 national budget to be presented soon.
KK: Please give us a picture of the state of industry in Zimbabwe and the effects of deindustrialisation over the last 17 years.
DN: There is no doubt that industry was affected due to a decade of economic downturn and the effects of such have been a shrink in capacity utilisation in industry which resulted in a decline in employment levels and closure of companies. Liquidity constraints have further exacerbated the situation for most companies, thereby affecting cash flow positions and operations. Industry continues to face foreign currency, liquidity and cash challenges..
KK: Business came under the spotlight, with government accusing it of greed, for the recent price hike increase of goods. What is your take on this?
DN: Recent price increases as a result of speculative hype and artificial shortages due to forex shortages, which is a reality, has become a major challenge for local businesses that rely on imports for their inputs to produce local basic commodities.
Panic was also being driven by the informal sector accumulating basic commodities to sell for US dollars cash.
There seems to be an emergence of errant bankers, and fuel dealers, which has also resulted in parallel markets that saw the huge loss of confidence in the local currency and creating unnecessary uncertainty in the market.
KK: The introduction of Statutory Instrument 64 of 2016 is blamed for the escalation of prices of basic commodities as well as the sale of smuggled products. Is this not a case of unintended consequences?
DN: Escalation of prices cannot be blamed on SI64. There is no doubt that business realised gains following the introduction of SI64 of 2016. A good example is that of the cooking oil industry now operating at an average of 90%.
Smuggling had been rampant prior to SI64. All that is needed is to curb corruption, and there must be zero tolerance to corruption. What is also needed is again a friendly approach and principles between business and Zimra.
KK: What in your view should be done to alleviate the current cash shortage in Zimbabwe?
DN: Shortages on the market are to do with structural issues. Strong economic foundations rooted in export-led growth and fiscal discipline are needed. Any country’s economic success stems from a strong export sector, low unemployment, strong manufacturing sector and a balanced budget.
We need new money into the economy from increased production hence the need for FDI (foreign direct investment) and local investments.
KK: How has business been affected by the delayed allocation of foreign currency by the Reserve Bank of Zimbabwe (RBZ)?
DN: Business is failing to import raw materials because foreign payments are not being processed with some having been in the queue for over a year now.
This has seen some cancelling orders due to these delays. Some local suppliers have even doubled prices to allow themselves to buy forex. The foreign currency allocation framework is not efficient as most of our members are having to wait for months to be able to import and this promotes exploitative opportunities for speculators.
KK: What is your view on the growing informalisation of the economy as the formal sector continues to shrink?
DN: It shows the reality of the new normal economy which calls for the need for authorities to put measures in place to ensure revenue contributions from the sector.
ZNCC is carrying out a survey on “Understanding the characteristics and dynamics of the informal sector in Zimbabwe” which will be an honest examiner of realities, challenges and how we can improve on policy effectiveness.
The survey will also help in correcting the levels of smuggling because it will give a clear picture of how the informal sector behaves.
KK: Local industry is becoming increasingly uncompetitive due to the overvaluation of the United States dollar. How can this be dealt with?
DN: Measures must be put in place to reduce concentration risk on the use of a single currency (US$), so that the public can use other currencies in the multi-currency basket. Competitiveness is a major aspect in doing business and lack of competitiveness has been a major constraint in doing business. The collaboration of the private sector, government and academia through the establishment of a National Competitiveness Commission will help address this.
Typically our labour costs are about 25% higher than than our peers in the region and our utility costs are again unfavourable for competitive pricing of goods and services.
KK: What are your expectations as ZNCC from the national budget to be presented soon?
DN: We expect government to foster responsible and productive expenditure, reduce the budget deficit and adopt a cash budgeting framework. Employment costs must also be reduced as they are not sustainable at all. International best practice suggests that figures of no more than 50% should be adequate, with 56% and above considered dangerous to government-funded operations and projects. The wage bill needs to be addressed as a matter of urgency and government needs to act on ghost workers.
We also expect government to pursue a progressive and equitable tax regime that seeks to protect established businesses from informal and unregistered businesses that do not contribute to the fiscus.
KK: Government is in the process of establishing Special Economic Zones (SEZs). In your view, can they be an accelerant for revival in such an environment?
DN: Yes, they are an accelerant for economic revival and will act as a catalyst for economic growth and as a key enabler (investment vehicle) in attracting foreign direct investment (FDI), promoting industry competitiveness, resuscitating ailing industries, promoting value addition and enhancing exports and creating employment.
On October 20 2017 (today), ZNCC will hold a ZNCC policy discussion forum on Special Economic Zones to embrace the new normal economy in the enactment of Special Economic Zones, identify gaps in the enactment of the Special Economic Zones, unlock potential for SMEs in the SEZs and to deliberate on the best model for SEZs.
KK: You recently held the Women in Enterprise Conference and Awards (Weca). What is the objective behind this?
DN: The conference and awards hinge on assessing the role and celebrating the success of women entrepreneurs in the economic development of the country. Ever since the first Weca conference in 2013 that ran under the theme “The road map to Zimbabwe’s desired future assessing and recognising women’s contribution to the economy”, the event has been successfully hosted annually, attracting more than 300 delegates every year for both the conference and dinner. Over the years the Weca conference has become a brand that attracts top notch speakers, from across Africa, the likes of Gloria Serobe of Wiphold, Southern and Central African CEO of Standard Bank Pindie Nyandoro, Grace Omey Obeng from Ghana, local businesswoman Kubi Indi, and many local celebrated women in business and in leadership. Going forward we have embarked on a game-changing initiative that seeks to link women-owned businesses to sustainable markets in corporate supply chains, SOEs (state-owned enterprises), government and development community. Hence our theme for just ended 2017 WECA was “Accelerating Growth: Connecting Women-Owned Business to Sustainable Markets” in line with our main objective which is to support women to grow their enterprises and play a meaningful role in the recovery of our economy.
KK: Policy inconsistency has been seen as an obstacle to investment. How can this be tackled?
DN: An adoption of economically sound and clear policies especially regarding the indigenisation legislation is required, which will demonstrate a mixture of optimistic expectation and fervour to invest in Zimbabwe from both local and international investors.
Consistency will help strengthen the operating environment which will avoid crowding out private sector investment through chronic fiscal deficits which end up increasing the cost of funds as well as loss of market confidence. We see the government is making efforts now to address some of these issues, but more has to be done.
Fact File: Divine Ndhlukula
l Founder and managing director of security firm Securico;
l Conferred with MBA degree by the Womens’ University of Africa in recognition of her business leadership and gender equity initiatives;
l Has an executive MBA from Midlands State University;
l Has won several awards including the Empretec Zimbabwe, Entrepreneur of the Year and Institute of Directors Zimbabwe Director of the Year accolades.;