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Sovereign risk batters Zim

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Finance and Economic Development Minister, Mthuli Ncube, is worried that Zimbabwe’s fragile sovereign risk as well as the adverse impact of the global financial crisis are ravaging the economy amid revelations local companies are failing to access offshore capital.

Ncube, who spoke at the International Business Conference held at the on-going Zimbabwe International Trade Fair (ZITF) in Bulawayo, said the impact of the global financial storm should not be underestimated.

“It’s a worrying development for local companies,” Ncube said yesterday.

He added: “It’s not good out there. Inflation has been rising due to various reasons including Covid-19 pandemic and central banks went into top gear increasing interest rates. This is slowing down economies. The problem is creating for us is the access to lending. It’s impacting here. Credit is less available.”

Ncube suggested some mitigating measures saying local firms should use domestic financial markets to raise capital as companies try to industrialise.

He said firms could utilise government assisted funding under fiscus, which is however limited space or through utilising Special Drawing Rights or borrowing from the global financial market.

“The problem with the global financial market is the interest rate risk and that the credit rating for Zimbabwe is very poor,” Ncube said.

He said local companies could make use of domestic capital markets like the Zimbabwe Stock Exchange, the Victoria Falls Stock Exchange.

“Make use of rights issues or quasi-equity instruments or REITS and debentures. There are also opportunities that exist in private equity and venture capital as well as corporate bonds like the Karo Mining one which was listed on the VFEX,” Ncube said.

Industry and Commerce minister, Sekai Nzenza, said there was need to a refocus, paying particular attention on “local production competitiveness.” nion to Zimbabwe, Jobst Von Kirchmann said: “EU market is a dynamic market. European consumers of today think differently. They have a clear message to politicians. They say we are ready to buy goods from Zimbabwe, but we want something, which is ethically correct, a clean product. We should work together to change the perception.”

The Confederation of Zimbabwe Industries CEO, Sekai Kuvarika said the currency issue was at the centre of risk.

“Offshore investors know that the de-dollarisation road map takes us to 2025. So, investors are cautious and it’s difficult for local companies to access offshore credit because investors are not sure what will happen after the 2025 de-dollarisation roadmap set by the Reserve Bank of Zimbabwe,” Kuvarika said.

She said the only key value chain to take Zimbabwe to the Promised Land was the policy value chain.

“It’s high time we come up with a policy value chain,” Kuvarika said.

“Industry is currently battling serious challenges. Government does not consult us. What happens is the government comes up with a policy and then come to us with it. It’s like we will just be asked to edit a policy that the government would have come up with already.”

She said industry was also battling an over regulated trading environment which is crippling the sectors. Companies are also battling a crippling power crisis, among other many challenges, the executive said.

The Zimbabwe Investment and Development Agency CEO, Tafadzwa Chinamo said: “Investors are looking for three things namely resources, markets and efficiency.”

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