Harare – Zimbabwe businesses are on the verge of closure following a surge in the annual inflation rate from July 2019’s 230.4% to 288.6% in August 2019. This development comes as Zimbabwe’s veiled crypto-currency (RTGS dollars or ZWL dollars) experienced 67% exchange rate volatility in the month of September 2019 alone, rendering businesses unstable, product pricing capricious and consumer spending inconsequential. With yesterday’s total water supply shutdown to corporates and residents in Zimbabwe’s capital city Harare due to unavailability of water treatment chemicals, Zimbabwe is in a crisis, ENN reports.
Organisations in Daily Crisis Meetings
Zimbabwe today is experiencing an energy crisis, a water crisis, a food crisis, a currency crisis and a business confidence crisis. ENN is reliably informed that various Business Member Organisations (BMOs) across the country have been holding crisis meetings since Monday in a bid to curtail the impact of the multi-faceted national crisis on their operations.
In Zimbabwe, most companies depend on foreign currency for sourcing raw materials and spares for their plant and equipment. Electricity is also critical to industry and commerce, particularly mining houses, mobile network operators and farmers for a smooth run of their businesses. With a daily electricity load shedding of at least 18 hours for both urbanites and corporates, productivity in Zimbabwe is literally switched off. For those directly connected to the Southern Africa Power Pool grid, electricity payments are in foreign currency, in the process stretching companies’ foreign reserves beyond capacity. Adding to the above is the national water crisis, which has graduated to a humanitarian crisis as both corporates and communities are going for weeks without access to safe water. The dairy and beverages sector is hardest-hit by the water crisis as it now spends millions of dollars every month sourcing water from private water suppliers to plug the water supply gap created by Zimbabwe’s water authorities’ incapacity.
Public health institutions in Zimbabwe are not functioning as they are running without adequate electricity, water and professional capacities, exacerbated by doctors who recently downed tools citing incapacitation. Private health institutions and pharmacies continue to peg their costs against the United States dollar, rendering access to medical treatment unaffordable to many. The diminishing consumer disposable incomes have weighed down on the services sector as most consumers no longer afford such solutions, particularly medical insurance, general insurance and life assurance options. Pensions have not been spared as pensioner investment values have been eroded into insignificance.
As energy costs escalate disproportionately to corporate and employee incomes, Zimbabwe is in a crisis. With alternative energy in the form of petrol and diesel now costing ZWL11.55 and ZWL12.08 per litre respectively, which is a cumulative hike of 89% from 21 July 2019 fuel prices, alternative energy solutions for industry have become expensive.
Winding back the clock, in the run up to the 2018 general elections, President Emmerson Mnangagwa’s winning election manifesto clearly captured the following aspects as his deliverables, which unfortunately happen to be Zimbabwe’s main challenges for year 2019 to date.
- Clean, Fresh Water for All
- Power Generation to Create Energy Surplus
- Affordable Electricity for All
- Affordable, Quality Healthcare Guaranteed
- For a Modern Railway Transportation System
- Promoting International Trade Via World Class Borders
- For Ease of Doing Business
- Zero Tolerance to Corruption
- For Real Jobs, Jobs, Jobs
Whilst the Zimbabwe President’s election manifesto could have been sincere, his policy crafters and implementers must work towards realisation of his noble socio-economic promises to the nation. In light of the above, ENN reiterates that the creation of a business environment totally rests with National Governments, and businesses react to policy pronouncements accordingly. Rwanda’s economic resurgence after the 1994 genocide is testament to this. Unfortunately, from inception, Zimbabwe’s policy authors, led by Finance Minister Mthuli Ncube, showed no respect to the business community as shown by lack of cohesion. Zimbabwean companies are failing to cope with Zimbabwe’s kamikaze policies and the nation is now in rigamortis mode. A critical policy that negatively impacted on Zimbabwe’s business landscape was the abrupt ban of a multi- system in favour of a local currency at a time economic fundamentals indicated disinclination to the move. In 2008, banning foreign currency eventually led to the printing of money in Zimbabwe, which ended up making Zimbabwe the record holder for the highest annual inflation rate, reaching 89.7 sextillion percent in November 2008. In a transition, stakeholder engagements and stakeholder buy-in are critical. Unfortunately, in Zimbabwe today, policies are pronounced and then stakeholders are engaged, instead of engaging stakeholders for their input first, in candour and on merit.
In Zimbabwe today, no one knows the colour of their money, as some transactions are US dollar based whilst some are local currency based. Depending on the storage mode of your money in Zimbabwe (hard-cash, mobile platform, bank card), you command a different purchasing power. Some sections of the economy are even allowed and/or forced to use foreign currency. With such a chameleon policy on currency, credible investors are shunning Zimbabwe and the business environment has become a Serengeti economy where one dog eats another for survival as confirmed by the perpetual spiral of commodity prices. With the ghost of 2008 and memories of the lost decade still fresh in Zimbabweans’ minds, the current economic state has put the future of businesses, communities and children at risk of enduring another lost decade.
In hindsight, the Zimbabwe President’s election manifesto focussed on critical pillars of the economy. Unfortunately, the same issues are now ravaging Zimbabwe, together with a drought induced national food crisis. As the world embarks on a 4th industrial revolution, Zimbabwe’s current crisis threatens to worsen its infrastructural obsolesces, in the process demeaning further its global competitiveness. According to AFDB, Zimbabwe requires US$10 billion worth of infrastructure investments in the next ten years to align itself to its vision of becoming a middle income economy by year 2030, and without immediate economic reforms, the existing transport, and water and energy infrastructure will dilapidate further, creating an unbeatable recovery trap for the country.
Zimbabwe urgently requires a candid talk with its leadership for a redraw (not amendments) of the entire economic policy framework, incorporating input from all stakeholders. Zimbabwe needs to redollarise for temporary stability pending a unified resolve. Zimbabwe must nip corruption in the bud, and Zimbabwe needs to overcome its political divide for a united approach in rebuilding its torn nation.