THE Confederation of Zimbabwe Industries (CZI) has said the move by some local companies to wind up operations in regional markets and focus on the domestic market could save the firms from collapse under the multiple currency dispensation.
Report by Victoria Mtomba
Faced with competition from big brands that have already established their presence in the region, most local firms have all but struggled to keep pace with regional peers.
CZI president Kumbirayi Katsande said despite recovering from a long economic meltdown, the performance of most firms had been subdued after the local currency was scrapped.
He said this had forced executives to be cautious.
“You cannot afford to make errors in this environment. It’s an unforgiving environment of hard currency. Businesses should position themselves well to survive,” Katsande said.
He said if a company failed to respond to the environment it will not survive as local companies were facing many hurdles.
Companies are facing many challenges that include absolete equipment, lack of long term capital and competition from other players due to the use of hard currency and water shortages.
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Katsande said the business sector owes the local authorities $100 million in unpaid bills.
David Mupamhadzi, an independent economist who also doubles as adviser in the Ministry of Economic Planning and Investment Promotion said the decision by local companies to invest in the region was commendable, but urged them to carry out comprehensive feasibility studies before they penetrated the markets.
“Initially, the move by Zimbabwean companies to look for opportunities in the region was a step in the right direction,” he said.
“It meant more business opportunities in a larger market with a higher income per capita and more disposable income compared to Zimbabwe.
“However, it is important for companies to ensure that they have adequate resources for capitalisation when they enter into the region.”
An economist with a locally owned bank who requested anonymity on professional grounds said some companies were closing down their foreign entities as a strategy to raise capital for local entities as capital continued to be scarce locally.
“If you look at it this way, even local companies are disposing off their non-core assets to concentrate on core business. They are trying to consolidate their positions locally and avoid spreading the capital elsewhere,” he said.
Another economist said firms were returning due to the relative calm in the country.
“It makes economic sense to concentrate on local businesses as competition will not be as stiff as in foreign markets,” he said. Critics say local companies operating in the region should be more aggressive, arguing that failure to do so may result in them being overtaken by the break-neck pace of globalisation.
