Zimbabwe Business Watch : Week 7
Whilst political developments preoccupy the business community, it is more of the same for those that have to endure the ever worsening economic crisis. Industry requires approximately USD 2 bln to recapitalise as a result of the counter productive price controls introduced in June last year. This figure exceeds Zimbabwe’s total annual export income.
Whilst the bottle neck in the banking sector has eased somewhat, cash flow ripple effects are still being felt through all industrial sectors. This has resulted in the value of the USD easing at the top end of the forex market where large volumes are traded. Exporters are desperate to convert export earnings into ZWD to pay their bills but the market place does not have the cash and cannot afford the price. At the lower end of the market, currency rates of exchange have risen dramatically to sit at as much as 70% higher than the larger parcels.
Because of hyper inflation and the inability of Ministry and RBZ to cope, most salary workers are now paying executive rates of tax, drastically reducing disposable income. This further affects spending patterns and behaviour as more and more of the pay package is now spent on bare essentials such as food, housing and transport.
Disparities in pricing across the spectrum, from the cost of services to of goods on the sheleves continue to widen and this in itself, generates another parallel economy as opportunist pounce to exploit the situation. A local economist predicts that the USD will be placed in the region of 100 million to 1 in June.
