Zimbabwe business confidence levels plummet

 Zimbabwe business confidence levels plummet
Published: 28 April 2019
CAPTAINS of industry and the generality of the population are slowly losing hope in government's ability to turn-around the country's economic fortunes.

The general impression emerging is that government seems to be running out of ideas to alleviate the unfolding economic crisis, which has left many living from hand-to-mouth.

Finance minister Mthuli Ncube has been the poster boy of austerity measures being hyped by President Emmerson Mnangagwa's government.

Generally, austerity is both a political and economic term referring to policies that aim to reduce budget deficits through spending cuts, tax increases, or a combination of both.

In Zimbabwe's case, these involve measures aimed at increasing government revenue and cutting back on expenditures by, among other things, shrinking the civil service wage bill.

As part of the austerity measures, Ncube introduced the much-loathed two percent tax on intermediated financial transactions in a bid to boost government coffers.

While the tax purse has grown, the tax caused prices to go haywire.

The cost of living, as measured by the Consumer Council of Zimbabwe, has therefore shot up to $790,77 per month.

Workers are crying foul and for a good reason too.

The average salary for a low income earner currently ranges between $350 and $600, which means that the majority of the workforce has been condemned to poverty.

Analysts argued that there has been no sign of economic revival ever since the inception of the austerity measures.

If anything, the general populace is going through the pain of severe inflation, with prices going up almost on a daily basis.

This has pushed some retailers and service providers to demand payment in United States dollars — or pegging prices against black market foreign currency rates, thus driving prices beyond what many ordinary people can afford.

Ncube is urging Zimbabweans to tighten their belts in the meantime.

On Wednesday, the Finance minister was adamant that the measures will be a success, adding the results will only start to be seen by next year.

Renowned economist, Steve Hanke, is not convinced.

He warned that Ncube risks running out of "credibility".

"This idea that you have to have pain to move forward, no, you just need to have the right policies to move forward," he said.

"The idea that this takes a long time and you have to have pain (is misplaced). If you do good economics, you don't have to have pain," added Hanke.

The International Monetary Fund has since warned that the economy could be heading towards a recession.

The signs are clearly on the wall.

Manufacturers are cutting down on production while others are closing down.

National Business Council of Zimbabwe president Langton Mabhanga said Ncube must demonstrate that the austerity measures are bearing fruit.

"The minister could be advised that while it is important to flirt and convince foreign capital, local engagement, consultations and constant cultivation of confidence are more important," said Mabhanga.

"The minister needs to do more to appeal to real economic powerhouses of Zimbabwe who are the small to medium scale entrepreneurs and the informal sector. While we dream to attract the unwilling capital from the West and USA, more inward looking production and productivity enhancement policy trajectory will deliver economic environmental stability and confidence".

Economist Simbarashe Gwenzi said the current economic quagmire has little to do with austerity measures.

He argued that the burden on Zimbabwean businesses is not so much about austerity measures but how the market has reacted to them.

"The major challenge with this economy is that there's a cyclical downturn and a deterioration in confidence, which can only be dealt with if there is an improvement in the political risk," he said.

Economic expert Carren Pindiriri said the high cost of doing business will continue to drive prices.

"Prices will continue to go up as long as the parallel market rate continues to balloon. It is the main cost driver…," Pindiriri said.
- dailynews


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