Industry buffeted by fresh volatility

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ZIMBABWE’s sickly economy is experiencing severe fresh headwinds, triggered by spiralling production costs, soaring parallel foreign currency rates and a subdued aggregate demand as disposable incomes continue to plummet.
As a result, experts warn, the country is grappling with the threat of stagflation for the second time in a decade — a situation in which the inflation rate shoots up, economic growth rate slows down and unemployment remains high.
This comes as business is reeling from growing wage-hike pressures and the negative effects of rocketing inflation — which hit a 10-year high of 59 percent in February — while consumers are groaning under the weight of the country’s ever rising cost of living.
“Zimbabwe could be heading for stagflation in the foreseeable future given the low output prospects, high unemployment and rising inflation,” advisory firm Morgan & Co warned last Friday.
It added that a tell-tale sign of harder economic times ahead was the confirmation by major companies such as Truworths, Edgars and Dairibord — which recently released their financials — that they were operating below capacity, as well as the fact that some firms had gone under judicial management due to lack of foreign currency to import raw materials.
“Inflationary pressures may also arise from communication-intensive businesses (such as mobile network operators and Internet service providers), transferring the higher tariffs burden to end-consumers,” Morgan & Co said.
It also warned that “should the new tariffs be rejected, consumers and businesses should expect erratic communication services from telecoms operators”. Mortgage lender CABS concurred with Morgan & Co’s view, saying most companies were now facing severe economic challenges, with the risks associated with operating a business in Zimbabwe continuing to worsen.
“The risks and opportunities in Zimbabwe have further escalated.