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'Pepkor exit testifies Zimbabwe not open for business'

by Staff reporter
28 Nov 2019 at 06:44hrs | Views
The Zimbabwean market exit by South African retailer Pepkor, which runs local retailer Power Sales, is testament that Zimbabwe is not open for business and speaks volumes about the increasingly toxic operating environment, analysts have said.

Pepkor, which controls 20 local Power Sales retail branches, announced on Monday that it had decided to exit Zimbabwe because the company was struggling to trade, amid soaring inflation, fuel shortages and stagnant wages.

Analysts have said it is an indictment on the current regime which always harps about the "Zimbabwe is open for business" mantra.

Economic analyst Gift Mugano blamed the country's bad policies for scaring away investments.

"It is not only the ugly economic environment that is affecting business in the country. Policy framework, return to investment, certainty in planning and consistency in policy making are key areas that companies look at when they want to invest in a country and when it comes to Zimbabwe all of these are not in place," he said.

"Beyond this ugly environment, there are economic shocks that affect investment in the country. Look at the Finance deputy minister (Clemence Chiduwa) who caused anxiety in several business entities when he announced that government would seize cross-border traders' imported goods if the their source of foreign currency is not disclosed. That caused a lot of instability and you cannot run away from the fact that it is one of the reasons companies will exit the country."

Economist Prosper Chitambara warned that more companies were likely to close shop due to the poor operating environment characterised by fuel and power shortages.

"Business in the country is full of uncertainties characterised by chronic price increases, shortage of fuel and acute power cuts. It is difficult to operate in such an environment and business is not only bad for Pepkor, many other countries are struggling," Chitambara said.

"Definitely, we are going to see many other companies following suit because no company wants to invest in a country where it gets losses in return."

Zimbabwe is experiencing its worst economic crisis in a decade characterised by triple-digit inflation and foreign currency shortages, acute power outages and fuel shortages resulting in companies struggling to operate.

The month-on-month figures for annual inflation in October was estimated at 440%.

Labour and Economic Development Research Institute of Zimbabwe director Godfrey Kanyenze buttressed Chitambara's sentiments that running business in Zimbabwe has become a nightmare due to a litany of setbacks.

"It is difficult to operate in this economic environment. Enablers are not in place. There are water, fuel, foreign currency and power shortages. Running a business with a generator will not be sustainable and fuel queues are not getting any shorter. There is no security whatsoever in as far as business is concerned," Kanyenze said.

"However, an investment is not easy to ditch. This one is a retail company and it might be easier for them to give up. They know Zimbabwe will come back. This was just a move to cut employee costs and retrenchment has become the best move companies can make."

Pepkor is one of several South African companies that have been caught in Zimbabwe's economic meltdown. Cement maker, PPC, last week reported that rising inflation and currency devaluation in Zimbabwe affected its half-year results.

John Robertson, another economist, said government had failed to build confidence in investors, adding that the declining purchasing power was also putting off businesses.

"It cannot be guaranteed that they would come to invest in the country due to business uncertainties. Confidence building is what we need to work on to attract investors," he said.

"So far, the companies cannot head up in this kind of economy, especially those that depend on customers' purchasing power. Purchasing power has gone down because wages have not been increased. It's not only for Pepkor, many other retail, manufacturing and production companies are struggling.

"Pressures are coming from all directions, there are high operating costs, accumulating wages bills, shortage of foreign currency, fuel shortages and power cuts. It's not surprising that they are struggling."

Source - newsday