Zimbabwe Business Watch : Week 9
Much of business is paralysed due to the bottleneck in the Reserve Bank’s release of foreign currency to exporters. These funds would normally provide for imported content in the mechanisms of day to day commercial and industrial activity. The lead time, from application to receipt, is growing and it is strongly suspected that the forex starved government is increasingly robbing Peter to pay Paul and this is exemplified by some reports of delays of up to 3 months. This effectively means that these funds are locked in the system and deprive business of their desperately needed cash and raw materials.
With the impending election, many decisions are being put on hold as boardrooms adopt a wait-and-see attitude. This has had a negative effect on building and construction, hospitality and, to a lesser extent, manufacturing and mining.
The indigenisation bill predicted to force mining companies to give up 50% of their interests, has effectively expired and will have to be redrafted. Nevertheless, threats of such legislation tend to intimidate the business community and, all in all, industry and commerce strives to survive in the hope that the political deadlock will be broken.
Statistics that provide interesting reading are that individual tax contributed 31% of revenue collection in 2007 followed by VAT 24% and company tax only 17%. Virtually all salary earners are now paying executive rates of tax due, and, due to the deteriorating business environment, VAT and company tax are realising less and less revenue for the treasury. The USD has climbed rapidly to over 23 million: 1 and the OM Implied Rate now exceeds 16,5 million to one. Newly listed ZECO pushed the stock market to rally across the board to post record levels.
