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Company closures: Adopt crisis management mode

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THE unabated company closures in Zimbabwe can best be addressed immediately by adopting a crisis management mode, an industrial body has said.

BUSINESS REPORTER

This comes against the background of a worsening liquidity crunch, increasing unemployment, widespread company closures, power shortages and massive load-shedding which has affected all facets of the economy.

The Confederation of Zimbabwe Industries (CZI) recently released a survey highlighting the extent to which de-industrialisation has reached, describing it as catastrophic and with dire consequences to the state of the economy.

In an interview, CZI vice-president Henry Nemaire said the cost factor is eating into many companies’ bottom lines, resultantly they can’t pay taxes on time and the penalties make things worse.

“When there is a crisis we need to go into crisis management mode. We need to identify the crisis, find out what is happening, what are the factors at play,” he said.

“Basically Zimbabwe’s industry needs a moratorium with regard to the main factors that are immediately affecting them. There is need for flexibility on wages and salaries to allow companies more breathing space,” said Nemaire.

He cited Cairns which went under judicial management and said it got more flexibility in dealing with pressing issues, but is now back in production.
Cairns Foods was placed under judicial management towards the end of 2012 after management had voluntarily applied for the move.

However, the company this year was set for a rebound after announcing that it would double output for baked beans products from its Mutare plant to meet increasing local demand.

“What is needed is to give struggling companies some form of moratorium on wages and salaries as well as statutory obligations towards Zimra [Zimbabwe Revenue Authority] and NSSA [National Social Security Authority]. Forget about the PDL [Poverty Datum Line] when the house is on fire, rather than having people in the streets it’s much better for them to earn lower wages,” he said.

He said other steps that were medium to long term in nature are not crisis management steps as the objective is to protect industries from what will destroy them.

“Once this crisis management approach is adopted, government can then formulate a policy framework that can address all core issues affecting industry,” said Nemaire.

The survey noted that there was a 3,3% decline in average capacity utilisation to 36, 3%.

Out of the respondents interviewed in the survey, 37% said they were operating at levels above 49% while others said they were operating at levels below 49%.

The survey noted that factors affecting industry and limiting capacity in the manufacturing sector remain unchanged with similar factors being recorded over the last three years.

The continued influx of imports into the country coupled with low disposable incomes for the majority of consumers were also cited as problematic issues that are affecting industrial operations.

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