WHILE President Emmerson Mnangagwa and his government officials continue to chant with monotonous repetition the mantra “Zimbabwe is open for business”, the reality on the ground is different: companies keep facing existential threats due to the chronic liquidity crunch and cash crisis.
— Staff Writer.
Companies are still struggling and people losing jobs due to the economic tailspin.
South African-based and London Stock Exchange-listed African budget airline Fastjet’s shares collapsed on Wednesday after warning it could go bust unless it obtains new funding.
The airline, set up by easyJet founder Sir Stelios Haji-Ioannou, flies in several African countries, including South Africa, Tanzania, Mozambique, Zambia and Zimbabwe.
Some of the airline’s problems are caused by Zimbabwe’s economic environment. Fastjet has just US$3,3 million in cash, of which US$1,75 million is held in Zimbabwe and is not readily accessible due to the liquidity crunch and cash crisis.
South African Airways (SAA) is also suffering due to Zimbabwe’s financial problems.
SAA dominates the lucrative Harare-Johannesburg route, flying five times a day.
It also flies to Bulawayo, the country’s second largest city, as well as Victoria Falls, which is a popular tourist destination.
While government claims the economy is recovering, facts say otherwise.
Zimbabwe is among the top five countries in the world struggling to repatriate airline ticket revenues, with the International Air Transport Association (Iata) saying blocked funds in the country total US$76m.
Zimbabwe owes the largest chunk of the unremitted funds to SAA. About US$60 million in SAA ticket sales remains in the country. Given SAA’s precarious position, the airline is now turning to high-level government officials to secure the payment.
The only countries whose debts exceed that of Zimbabwe are Venezuela (US$3,78 billion), Angola (US$386 million), Sudan (US$170 million) and Bangladesh (US$95 million), according to Iata.
Fastjet said this week it is talking to major shareholders about an equity fundraising.
However, if no new funds emerge, Fastjet said it may not be “able to continue trading as a going concern”.
“Whilst initial discussions with certain shareholders have been positive, discussions are ongoing and there can be no guarantee of a successful outcome,” the company said.
Shares fell 72% to 4,25p on Wednesday afternoon trading in London, valuing the company at less than £20 million (US$26 million). If the talks fail, Fastjet said it could be suspended from trading on the AIM market.
Sir Stelios has been Fastjet’s major shareholder, but now has a stake of less than 3% in the company. Two years ago he was entangled in a boardroom wrangle about the airline’s control and direction.
The airline said it has “continued to consume cash”, citing the recent purchase of equity in three ATR72 planes, “further operating cash outflows and a creditor reduction”.
Fastjet warned earlier this month that “it was entering into the quieter period of trading across the calendar year, and on forecast projections, headroom over available cash resources was minimal, particularly in the early part of the next 12 months”.