Roundup: Zimbabwe's major sectors bemoan harsh operating environment

The major economic sectors have bemoaned the harsh operating environment in Zimbabwe which is impacting on their profit margins and forcing them to employ more prudent liquidity management measures.

Financial statements released this week by several companies painted a gloomy picture of tight liquidity challenges, low capacity utilization within industries and outright de- industrialization the economy continued to underperform in 2014.

The companies are in the financial, agricultural, mining and construction sectors.

African Banking Corporation of Zimbabwe Limited (BancABC) acting chairman Alvord Mabhena said the Zimbabwean economy was going through "one of the most difficult phases since dollarization, characterized by chronic liquidity challenges, rapid de-industrialization, job losses, increased power outages and a financial sector that is hamstrung by high level of non- performing loans".

He said the economic rebound that had been experienced in the early years of the post hyperinflation era appeared to have come to a premature end with economic growth as measured by the Gross Domestic Product having decelerated from 10.6 percent in 2011 to 3. 4 percent in 2013.

Mabhena noted that the economic performance would remain subdued in 2015 with the initial projection of a 3.2 percent growth likely to be revised downwards because of poor performance in agriculture caused by a poor rainy season.

He added that capacity utilization in the manufacturing sector currently at below 40 percent was not likely to improve during 2015 as access to working capital remained a major challenge.

BancABC recorded an attributable loss of 438 million Botswana Pula (44 million U.S. dollars) compared to an attributable profit of 198 million Botswana Pula (19.9 million U.S. dollars) in 2013.

Chairman of the People's Own Savings Bank Israel Ndlovu also bemoaned the harsh operating environment but said the banking sector was generally stable and profitable.

"Credit risk remained the most significant challenge in the banking sector and liquidity constraints continued to have negative effects on the operations of some banks," he said.

John Mushayavanhu, group chief executive officer of FBC Holdings, parent company of FBC Bank Limited, said the bank had recorded a profit before tax of 8.1 million U.S. dollars despite constraints of high risks in liquidity, credit and operational management.

FBC chairman Herbert Nkala said the group continued to be in a strong liquidity position and was able to comfortably meet customer requirements but would continue to exercise prudence in the area of liquidity management under the current challenging economic environment.

The entire group, including its building society and securities and reinsurance arms, recorded a profit before tax of 17.1 million U.S. dollars in 2014.

Top insurer ZimRe Holdings also described the operating environment as characterized by acute liquidity shortages, low productivity, limited external capital inflows, depressed demand, underperforming exports worsened by low international commodity prices and poor performance of the utilities sector.

"Company closures and retrenchments of staff have fuelled the growth of the informal sector. The continuation of the US restrictive measures has contributed to the weak performance of the economy," chairman Benjamin Kumalo said.

Top gold miner RioZim said the economic environment remained fragile with an unsustainably high cost of debt, subdued export performance, lack of competitiveness attributable to infrastructure deficits, high utility costs and massive de- industrialization.

Liquidity challenges, a poor investment climate and a volatile financial environment made the situation worse, chairman Lovemore Chihota said.

"The mining sector was further dampened by weakening metal prices, low foreign direct investment and rising cost of production," he added.

The group recorded an operating loss of 11 million U.S. dollars compared to an operating profit of 2.1 million U.S. dollars the previous year, with the underperformance mainly attributed to high

finance costs and low production volumes at its refinery caused by the inability of a supplier of raw material to meet demand.

Coal miner Hwange Colliery Company also described the economic environment as "very challenging".

"The persistent liquidity challenges and legacy debts slowed down the company's effort to bring up to date staff salaries. Staff salaries therefore remained in arrears for periods ranging from between six to 12 months for the lower grades and more than 12 months for managerial staff," chairman Farai Mutamangira said.

Agricultural and mining implements manufacture Zimplow also said the economy remained very fragile with huge external and domestic debt, and consequently very limited fiscal space.

"Capital projects continue to be postponed. It is within this context that we are sadly reporting the annual loss for the group, " chairman Zed Rusike said.

Agricultural units had posted an operation profit before impairments but this was neutralized by the other units which posted losses, resulting in a group loss after tax of just under 3. 1 million U.S. dollars.

Construction and piping company Masimba Holdings Limited said its financial statements were being presented "at a most difficult time in the history of the country".

"During the year under review, the economy continued on a downward spiral, which, coupled with the persistent liquidity challenges, had a negative impact on the business operations. The economic environment deteriorated further in the second half of the year and had an adverse impact particularly on the contracting division," chairman Greg Sebborn said.

Despite the prevailing conditions, most of the companies are optimistic that they will turn the corner in due course. Endi