Look back at 2016: Highs and lows of business in Zimbabwe

By John Kachembere

The year 2016 will go down as a tough one for the local economy since 2008 as the country slid back into recession and unemployment skyrocketed to unprecedented levels.

Zimbabwe’s economy was expected to grow by 2,7 percent this year before it was slashed to 0,6 percent this year due to drought, which had adverse effects on agriculture, mining and manufacturing.

The International Monetary Fund was not so generous and said the country’s economy contracted by 0,3 percent this year and is expected to contract further by 2,5 percent in 2017 in the absence of new capital and robust economic policies.

We look at some of the events that dominated the business calendar.

The Zimbabwe Stock Exchange, which was at the receiving end of foreign investors who were fleeing President Robert Mugabe’s predatory policies since August 2013, got a new lease of life during the last quarter of 2016 following news of the introduction of bond notes.

The bourse that lost over $2,5 billion in market capitalisation in the last three years  saw its  stocks rising 13,46 percent in November as local fund managers preferred non-cash asset classes amid market jitters over the introduction of controversial bond notes.

Shares gained buoyed by strong demand for scrip in the market rattled by the dreaded currency as fund managers exited cash and near-cash positions.

Concerns over the actual value of the recently launched bond notes loom large with the Reserve Bank adamantly sticking to a par value against the American unit.

The ZSE mainstream industrial index rose 13,46 percent in November to close at 137,08 points, while the resources index surged by a whopping 70percent to close at 57,41 points in the same month as investors take comfort in mining counters.

Market capitalisation increased from $3,423 billion from $3,6 billion in the period under review.

In June Zimbabweans woke up to the news that government —  through the Industry ministry —  had effected a ban on selected imports.

The chaotic implementation of the Statutory Instrument 64 of 2016 (SI64), which was aimed at reviving the local industry, resulted in mass protests at Beitbridge Border Post.

The South African government also tried to force Zimbabwe’s hand but to no avail, with Harare arguing that South African companies were free to come and manufacture in Zimbabwe and also enjoy the same protection.

Industry minister Mike Bimha remained defiant, saying government would not deviate from engineering its economic revival agenda and would press ahead with the limited import restrictions.

However, six months down the line Bimha said the import ban has resulted in the country gaining $340 million investment in the manufacturing sector.

In addition, the Confederation of Zimbabwe Industries, the manufacturing sector’s capacity utilisation increased from 34,3 percent in 2015 to 47,4 percent in 2016. 

Following Mines minister Walter Chidakwa’s decision to merge all diamond mining companies operating in Marange into a single entity, the Zimbabwe Consolidated Diamond Company (ZCDC), the gems production dramatically plummeted to low levels.

According to the Zimbabwe Chamber of Mines output in the diamond mining subsector has so far this year plunged by a massive 40 percent to two million carats, from 3,3 million carats last year.

In 2014, about 4,7 million carats of diamonds were extracted from the fields, and the statistics produced by the Chamber of Mines of Zimbabwe revealed a sustained plunge in output triggered mostly by government’s interference in diamond mining.

This year’s decline represented a loss of 1,3 million carats in just 12 months.

The diamond mining industry’s contribution to the sector’s revenues slowed to five percent this year, from 11 percent last year.

In addition to the fiasco, which saw the government being dragged to court by diamond firms, at least 5 000 workers who were dependent on the nine diamond companies that have been stampeded out of Chiadzwa, were thrown out of employment.

It means that an estimated combined 30 000 people were condemned to poverty, if the families of these affected employees are taken into account.

But quite striking was the serious drop in diamond revenues, which government had hoped to use to fund its budget once the State moved in with its own machinery.

Chidakwa’s bungling got worse when President Robert Mugabe publicly acknowledged that the mining firms had looted an estimated $15 billion worth of diamonds since government parcelled out the Marange claims to a number of different players, a few years ago.

Meanwhile, Econet Wireless Global’s data, voice and IP provider, Liquid Telecom has secured a $300 million  syndicated loan to help fund its R6,55 billion acquisition of Neotel and its expansion plans into Africa.

Liquid Telecom chief executive Nic Rudnick said the purpose of the additional funding was to allow the group to help fund the Neotel purchase as well as other deals in Botswana and Tanzania.

Liquid Telecom is the leading independent data, voice and IP provider in eastern, central and southern Africa.

It supplies fibre optic, satellite and international carrier services to Africa’s largest mobile network operators, ISPs and businesses of all sizes.

It also provides payment solutions to financial institutions and retailers, as well as award winning data storage and communication solutions to businesses across Africa and beyond.

Following the completion of the Neotel deal, Liquid could also consider listing the combined entity on a stock exchange.

NetOne chief executive Reward Kangai and Zimbabwe Revenue Authority commissioner general Gershem Pasi were early this year sent on forced leave to pave way for investigations.

Kangai —  and his management —  were subsequently fired on allegations that include lack of suppliers’ reconciliations, payment of funds to companies that are not contracted to NetOne, over-invoicing of contracts and poor accounting methods.

On the other hand, Pasi —  who is currently challenging his suspension in Court —  and his five other executive managers were sent on forced leave in May after they were implicated in a suspected vehicle import scam.

And the dualisation of the Harare-Beitbridge highway started taking shape this year after years of quibbling between government and a local investor.

Transport minister Joram Gumbo recently signed a Concession Agreement and Engineering Procurement and Construction contract with Austrian-based firm, Geiger International, to pave way for the start of the dualisation of the highway linking the landlocked country to its busiest ports of entry. The project is valued at $984 million. Daily News