Zimbabwe companies are feeling the pinch of severe economic headwinds such as declining aggregate demand brought on by dwindling disposable income and the unrelenting depreciation of the local currency relative to all major currencies, chief executive officers (CEOs) have warned.
They said hefty taxes are another challenge, along with high electricity tariff, volatile exchange rates, shortages of foreign currencies, rising inflation, and rolling blackouts.
Consequently, business lobby groups confirmed this week that multiple corporations started laying off staff this month in an attempt to cut costs.
“ Companies are under serious strain as disposable income continues to dwindle.
“The capacity of the market to consume goods produced by the industry continuously undermines the failure to have decent disposable income.
“If nothing is done now or by the second quarter, there will be a catastrophe as the mortality rate of organised corporations is going to increase,” the CEO Africa Roundtable chairman, Oswell Binha told Business Times.
He added: “If the government does not revisit policy direction in which it supports growth and sustainability of formal businesses, there will be a catastrophe.”
It comes at a time when, in spite of government interventions, the cost of raw materials has skyrocketed.
The Confederation of Zimbabwe Industries president Kurai Matsheza concurred.
He claimed that the government disregarded advice and its interventions were insignificant.
He warned: “The country will have a United States dollar inflation and aggregate demand will go down resulting in capacity utilisation going down.
“If the capacity utilisation comes down some companies may be seriously affected.
“Some companies have already started retrenching following a tough operating environment and multiple taxes.”
Businesses should be ready to navigate new economic waters in 2024 as it will be characterized by policy upheavals and uncertainty, according to Mark & Associates’ 2024 outlook and strategy document.
“Already, the business community in Zimbabwe is seized with uncertainties around regulations, taxes and revenue measures introduced in the 2024 National Budget.
“While National Treasury has moved in to “fine-tune” some of the measures (exemption of basic goods from VAT and reduction of Sugar Tax), the policy environment remains ambiguous.
“ It is a fact that most African governments are squeezed between poor citizens and big financial holes in public coffers,” reads part of the document.
It continues: “It is also a reality that depending on aid or hand-outs alone will not do the trick and politicians across Africa are asking more of their tax collectors.
“It appears that taxing citizens is the only feasible solution within their reach. We should expect a lot of altering of both fiscal and monetary policies in 2024 which would undoubtedly usher an unstable business environment. High levels of policy uncertainty will also lower investment, employment, and economic output.”