With the economic crisis showing no signs of abating, more and more companies are twisting in the wind, making it doubly difficult for the ruling ZANU-PF party to achieve its 2013 election promises.
There are projections that the second half of the year would be difficult for industry, overwhelmed by severe economic pressures.
The biggest drawback for business has been the erosion of disposable incomes owing to the decline in the stock of cash circulating in the economy.
Banks have been unable to dispense cash to their customers because of a liquidity crisis, whose genesis has been the country’s inability to export and thereby generate foreign currency.
While the monetary authorities are doing everything in their powers to promote the use of plastic money, a larger section of the Zimbabwean population is still unbanked — 36 years after independence — and therefore relies heavily on the use of physical cash, which is being depleted on the domestic market.
As the cash crisis worsens and depositors queue for long hours to get cash from the banks, corporates are also finding it difficult to deal with the long queues of creditors demanding their dues in the face of declining demand for their products.
Liquidation notices continue to dominate newspaper columns as well as the Government Gazette.
Once again, the Industrial Development Corporation (IDC) will lose one of its assets.
The Zimbabwe Copper Industries (ZCI), a subsidiary of IDC, will go under the hammer tomorrow after it failed to ride the economic tide.
ZCI was one of the leading producers of copper profiles and brass products.
At its peak, it had capacity to produce 2 000 metric tonnes of copper and brass profiles per annum.
ZCI exported more than 80 percent of its output to South Africa.
After closing in 2010, a bid to resume operations in 2012 failed. Since then, its liquidator has been scouting for buyers without success.
This month, Pelhams Limited, which not many years ago used to be a top performer on the Zimbabwe Stock Exchange (ZSE), was placed under provisional liquidation.
The Pelhams group, in which businessman, Tawanda Nyambirai, had a controlling interest, was suspended from the ZSE in May after applying for voluntary suspension in November last year.
In its last published financial results for the year ended March 31, 2015, losses increased to US$3,3 million, from US$1,7 million the previous year, after weakening consumer demand crippled operations.
Sales were, meanwhile, plummeting.
“Take notice that on the 18th day of November 2015…the High Court at Harare issued an order for the provisional liquidation of Pelhams Limited. Any interested person who wishes to oppose the liquidation of the company shall file a notice of opposition with the Registrar of the High Court,” reads the Government Gazette notice.
Two weeks ago, Altfin Life Assurance, another former high flier, was placed under liquidation after regulator, the Insurance and Pensions Commission (IPEC), cancelled its operating licence last year.
Altfin had failed to meet the prescribed minimum capital requirement of US$1,5 million at the end of 2013.
In April 2014, IPEC gave notice of its intention to cancel the short-term insurer’s licence and ordered it to stop disposing of its assets after failing to settle total gross outstanding claims worth US$3 million as at December 31, 2013.
ZCI, Pelhams and Altfin are not the only companies that have found the going tough.
Several others are quietly disintegrating, leaving their dejected workers to join a swelling job market.
According to High Court records, six companies were placed under judicial management, while 13 were liquidated during the first quarter of 2016, compared to 11 and 17, respectively during the same period last year.
Businesses are having to contend with antiquated equipment, punitive licence fees and high utility bills that are making the revival of local industries impossible in the short-term.
Many of the struggling companies are stampeding the High Court in search of refuge from marauding creditors.
Even court-appointed administrators are finding it difficult to revive the distressed companies, with creditors, particularly banks and employees, losing their money in failed institutions.
This week, analysts said the situation may deteriorate even further, with more companies throwing in the towel.
Economic commentator, Evonia Muzondo, noted that some companies were surviving on bringing into the country finished goods for resale. Now that they can no longer import or import less due to the introduction of Statutory Instrument (SI 64) of 2016, this will eat into their revenue and profitability.
SI 64 bans the importation of a wide range of products as a way of protecting local industries.
“Some companies will, however, benefit from the import restrictions especially those that produce locally. Yes, more company closures will be witnessed this year as there is no catalyst in the short-term to reverse the current trend. Companies are in serious need of recapitalisation and they are failing to generate the cash or access cheap loans for working capital,” said Muzondo. Financial Gazette
