Zimbabwe Business Watch : Week 39

The business sector continues to be trapped between unrealistic operating costs and pressure from labour groups.

The Finance Minister’s recent statements, acknowledging high utility bills and low production, has done little to comfort those that live on the brink of collapse. Credit, where available, is costing up to 15% p.a. for the USD, and this is prohibitive and simply adds further pressure to the margin for exporters and those supplying the domestic market. The result is either the loss of profit or the loss of the customer.

Production capacity utilization has slowly crept up to estimates of around 20% but this is far too low to sustain companies indefinitely.

The disappointing news on the political front brings home the realisation that foreign funding of the financial sector is still some way off and many believe that this is the only way to kick start the economy.

On the positive front, another large gold mine has re-started and there may be plans to start operations at one the country’s biggest nickel mines. The IMF loan of USD 400 million will relieve some immediate pressure.

Zimbabweans continue to trade on a cash basis and grubby notes characterise the financial crisis. The disparity in exchange rates between the Rand and the USD provide an opportunity to those that continue to exploit the customer with additional margins of up to 25% on offer. However, the competitive nature of business is driving prices down.

This entry was posted by Sokwanele2 on Tuesday, September 22nd, 2009 at 1:16 pm. You can follow any comments on this entry through the RSS 2.0 feed. Both comments and pings are currently closed.