ZIMBABWE needs to address problems being faced by the private sector and consider debt retirement strategies as it moves a gear up on its re-engagement process, local economists have said.
BY VICTORIA MTOMBA
A team from the World Bank’s private sector arm, the International Finance Corporation (IFC) visited the country on an exploratory mission last week, the first time in over a decade signalling Zimbabwe’s re-engagement efforts with international financial institutions.
Analysts say the visit was largely symbolic in the sense that it does not deal much with structural issues.
“As a country we have to deal with factors that are affecting the private sector development. It is not about them [IFC] giving us money, it is also about us to address the doing business environment, business regulation [aspects],” economist Prosper Chitambara told Standardbusiness on Friday.
Chitambara said the country is lowly ranked on doing business indices such as on transport, infrastructure, water and energy which are key for any investor who seeks to invest in a country.
He said the structural constraints needed to be addressed as local companies were closing down. This means that foreign investors would not be encouraged to put money in a destination shunned by local companies.
Kipson Gundani a local economist said the coming in of IFC showed renewed confidence but no immediate impact would be realised from the visit.
“I think they are engaging with the private sector because it highly responds and react to opportunities. Let’s twin engagement with the debt retiring strategy. The albatross which will impinge us as we have a huge debt overhang that affect our credit ratings as a country,” he said.
Chitambara said the liquidity crunch was one of the symptoms of the country’s problems as Zimbabwe was importing more than it was exporting.
“In a dollarised economy, the major revenue boosts are exports and Foreign Direct Investments but in our case it is not so,” Chitambara said.
The country’s imports are over $7 billion while exports are around $4 billion. The country has been failing to attract FDI that is above $400 million.
Chitambara said this also affected the debt situation in the country.
The country has received delegations from European Investment Bank, United Kingdom Invest Africa, Japanese, African Development Bank and the International Monetary Fund.
Finance minister Patrick Chinamasa said the coming in of IFC would not bring much today or tomorrow but was a step in the right direction.
The manufacturing has borne the brunt of the harsh economic environment which has triggered company closures and retrenchments.
Over 1000 workers have been retrenched from 67 companies in the first quarter of 2015.
In a recent report the Confederation of Zimbabwe Industries (CZI) said although capacity utilisation had increased to 39% in the year to date from 37,1% last year driven by the beverage and construction sectors, there were some sectors that underperformed.
CZI said the decline in prices could have pushed up the volumes in the beverage sector while the construction industry recorded an increase in business attributed to an increase in the number of government bankable projects.
“Notwithstanding the above positives, there were also some sectors which showed a decline in performance. One of the low performances was recorded in industrial chemicals sector which declined by 9,6%. Fertiliser manufacturers have experienced a low uptake of its products during the 2014-2015 season due to lack of purchasing power from farmers,” CZI said.