Brace for a tougher 2024

CLOUDINE MATOLA

 

Business executives are bracing for a tougher 2024  due to anticipated  strong headwinds  that could force companies  slash jobs, putting thousands of workers out of work in order to  contain spiralling costs, Business Times can report.

They also predicted that a number of companies will likely reduce capacity utilisation and a number of others may close, adding to the expanding corporate graveyard.

Severe challenges facing the industry include increased pressure on operational costs, liquidity crisis, currency volatility, shortages of foreign currency, and catastrophic loadshedding that affects local businesses for more than 18 hours daily.

An increasing number of businesses are using pricey diesel generators, which are costly to operate.

The president of the Zimbabwe National Chamber of Commerce (ZNCC), Mike Kamungeremu (pictured), told Business Times that industry should prepare for a more challenging 2024 because he sees possible downside risk.

“The year 2024 will definitely be a tough year.  I think even government themselves have predicted a reduced growth rate compared to 2023 so already that confirms that the year will be a bit tougher than the previous one,” Kamungeremu said.

He said: “Added on to that we have also been told about the drought induced by El Nino that will be coming in 2024 and that drought will definitely affect our agricultural sector and the ripple effect will be felt across the entire economy.

“And the other effect of the reduced rainfall which has been predicted to be normal to below normal will affect electricity generation capacity at Kariba  Dam. What that means is that the power challenges that we have been facing are also likely to continue in 2024 and that will also affect industry.

“Then over and above this commodity prices for our minerals on the international market have been depressed and that is also spilling into 2024 and that will also affect the revenue we are going to receive from the minerals and naturally if the revenue is reduced then we would also face problems because of the requirements that we have as a country which needs to be met.”

Ahead of a more challenging year, Kamungeremu counseled fellow businesspeople to implement risk mitigation strategies.

“So apart from recent monetary policy changes there are other factors which I have highlighted which will then make the year difficult. We appeal to fellow business people to put in place risk mitigating measures for example when it comes to power issues,  power challenges they need to invest in alternative energy so that business can continue even in times of power cuts,  it is important.

“Then with regards to government policy as ZNCC we will continue engaging for the improvement of the same so that the environment is better for our business people in Zimbabwe,” Kamungeremu said.

Kurai Matsheza, president of the Confederation of Zimbabwe Industries, concurred saying that certain taxes implemented on January 1st by Professor Mthuli Ncube, Minister of Finance, Economic Development, and Investment Promotion, will increase the cost of doing business because they have an impact on prices.

“The new measures which are toll fees, fuel levy, VAT increase from 2024 budget have meant price increases and hence increasing cost of doing business, “ he said.

Water crisis at the Kariba Dam has forced the Zambezi River Authority, which is jointly owned by the governments of Zambia and Zimbabwe and is in charge of managing the river’s waters and the Kariba Dam Complex, to reduce the amount of water allocated for power generation by 47%, from 30 billion cubic metres (BCM) to 16 BCM. This is predicted to worsen the ongoing power crisis in Zimbabwe.

The two power utilities that share water at Kariba equally for power generation—Zambia Electricity Supply Authority (ZESCO) and Zimbabwe Power Company (ZPC), a ZESA power generation unit—will each receive an allocation of 8 BCM this year  down from the current 15 BCM. This is due to a downward revision of the water allocation for 2024.

The Kariba North Bank Power Station is managed by ZESCO, whereas the Kariba South Hydroelectric Power Station is run by the Zimbabwe Power Company.

Matsheza said  that capacity utilization is probably going to be impacted because power outages are probably going to continue because Kariba’s water allotment was cut from 22.5BCM to 8BCM.

“Water allocation at Kariba was cut from 22.5BCM to 8BCM. This means generation from Kariba will be significantly low and hence loadshedding will persist hence affecting capacity utilization,” he said.

Matsheza added that there are certain unforeseen repercussions to the government’s inconsistent stance.

“This has got so many unintended consequences such as decline in sales,  increased informalization as traders opt for importing and increased working capital cycle, “ he said.

Matsheza also emphasized how businesses will continue to suffer as a result of the government’s inability to resolve the currency problem.

“The currency availability remains a perennial problem with its attendant issues, “ he said.

Matsheza added that although El Nino was expected to exacerbate the current situation, it will be better than expected if the rains continue.

“The rainy season had been forecast to be below normal. Thank heavens we’re having rain at the moment countrywide. If this sustains it may be better than forecast,” he said.

Captains of industry have been asking the government to make policies consistently for some time now since it affects planning and creates uncertainty in the sector.

Just this week, Professor Mthuli Ncube, the Minister of Finance, Economic Development, and Investment Promotion, reversed course on some  bad policy that was causing market disruption and fear in businesses by preventing manufacturers from selling to retailers.

“Retailers can purchase from manufacturers as long as they have obtained a valid Tax Clearance Certificate, and are VAT registered,” he said in a statement this week.

He added:  “Manufacturers are permitted to sell to institutions such as hotels, schools and other corporates, provided such clients are registered for VAT and possess a valid Tax Clearance Certificate,” said Professor Ncube.

He also adjusted sugar tax on beverages to US$0.001per gram from US$0.02 per gram.

“Special Surtax on Sugar Content on specified beverages has been adjusted to US$0.001 /gram and will be effective on the date of gazetting,” Professor Ncube said.

 

 

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