Zimbabwe counting the costs

Zimbabwe counting the costs
Published: 12 July 2016
Last week's nationwide stayaway has sent negative messages to foreign investors that are likely to militate against government's efforts to lure foreign direct investment, analysts have said.

On Wednesday, business in the whole of Zimbabwe came to a virtual standstill following a national job action called by disgruntled Zimbabweans, including cleric Evan Mawarire of #ThisFlag movement and pressure groups like #Tajamuka/Sesijikile and Occupy Africa Unity Square. The stayaway was a protest against the deteriorating economic environment, corruption and general governance issues. The groups have since threatened more such action this week as they push government to deliver on its mandate.

Economist Prosper Chitambara told Standardbusiness last week that while the economy lost substantive revenue, the country's image was also affected in the eyes of the investors.

"When there is no stability in the economy, they [investors] will adopt a wait-and-see attitude as there is a lot of political and economic uncertainties that affect the country's risk profile," Chitambara said.

He said a single day's loss in revenue was not good for the economy, which was already in bad shape.

"It actually has a negative impact because what it does mainly, in respect to loss of revenue, is that when there is no production, fiscal revenue is badly affected, but of course we are in a depressed economy," Chitambara said.

He, however, said the impact from a one day (stayaway) may not be too significant in terms of revenue as there "was not much coming through anyway in terms of fiscal revenue as companies are struggling and the fact that they [government, through Zimra] are failing to reach their [collection] targets".

Zimbabwe Investment Authority (ZIA) chairman Nigel Chanakira said stayaways were understandable and from a macro-economic and investor promotion perspective, "people will begin to carve question marks regarding the stability of the nation and economy because production and competitiveness are going to be compromised".

"If you look at a country like South Africa, for example, the labour force there is quite well-known for ‘toyi toying', violence in terms of burning tyres and crime; so that is what is associated with a country like that one.

Historically, it has attracted capital because it is a sophisticated economy. Now, on our part, generally we are not in that mode in terms of having work disruptions," Chanakira said.

"So generally, from a Zimbabwe Investment Authority perspective, it is not all together comforting to see disruptions of this nature."

He said in any economy in the world, a stay away or labour disruption is looked at negatively, adding that such action was not a good signal as it pointed to labour instability.

Chanakira said ZIA did not advocate such action and urged government to "resolve the issues as soon as you can so that we minimise [such disruptions]".

He said no investor would tolerate job action because they were very concerned about productivity.

"It [job action] also means a problem in issuing credit to those who are employed because they [banks] are not sure whether they [the people will be able to repay their loans and of course the whole economy slows down. Let us avoid them [stayaways] if we can or if we must have them, let us resolve them as soon as possible otherwise we will become a nation that is known for shutdowns and so forth," Chanakira said.

Financial analyst Persistence Gwanyanya said like any other business, banks lost the whole day of business as they failed to open normally.

"Transactional revenue was lost as utilisation of bank facilities was impacted negatively. Very little transaction took place and this led to loss of potential revenue. To be specific, revenue from ATMs, POS transactions and even transactions within the banking halls was significantly impacted on. Even trade in the money and capital markets was subdued, which meant significant loss in revenue," he said.

Gwanyanya said disruption in production would impact negatively on the ability of bank clients and their employees to service their loans.

"Though we can't accurately quantify the monetary effect of the stayaway at the moment, it was definitely not good for the financial service sector. There is therefore need for the government to sort out the contentious issues and ensure that they do not recur in the future," he said.

Confederation of Zimbabwe Retailers president, Denford Mutashu told Standardbusiness last week that such a disturbance was costly to all players in the value chain addition.

"If there is such economic disturbance like the stayaway, it generally affects the cycle of business and that cycle involves quite a number of stakeholders, players and activities. One of the activities it involves is the daily revenue generation. If you calculate the average number of shops that were closed that day and the potential revenue that they could have generated, it is quite a lot," Mutashu said.

"At the stage where we are right now, it is not something that we need as an economy. A better way to go forward is to engage; we need to sit down and look for solutions to such challenges."

Zimbabwe has been on an ambitious drive to attract FDI and has been undertaking ease of doing business reforms in a bid to compete with regional countries as a safe destination for FDI. This has seen government struggling to clarify some toxic legislations such as the Indigenisation and Economic Empowerment Act.

Government projects FDI into Zimbabwe to surpass $1 billion in 2016 on the back of deals signed with Chinese, Russian and Indian investors. The deals have been attributed to increased confidence.

In 2014, Zimbabwe recorded FDI inflows of $545 million, the highest since 2009 but the inflows were far lower than South Africa ($5,7 billion), Mozambique ($4,9 billion) and Zambia ($2,4 billion).
- online
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