Firms brace for tough times

the-external-business-environment

Tinashe Makichi Business Reporter—
MOST Zimbabwean companies are expecting a tough operating environment in the near future, according to chief finance officers surveyed by Deloitte.Of the CFOs surveyed by the chartered firm in its CFO Survey for Zimbabwe, 19 percent predicted a significant deterioration in company performance, 8 percent expected slight deterioration while 27 percent said they might be a continuation of the status quo.
However, 46 percent of the CFOs expected either slight to significant improvement.

The bulk of the respondents represented relatively small companies with 42 percent employed by entities with annual turnover of less than $25 million and a further 38 percent representing firms with turnovers of between $25 and $50 million.

CFO programme leader for Deloitte South Africa Mr Roy Campbell told journalists yesterday that Zimbabwe’s political landscape remained the biggest risk to business performance, coupled with the ongoing indigenisation and empowerment debate in the country.

“As is the case elsewhere in Africa, regulation is increasingly becoming a challenge for businesses operating in Zimbabwe,” said Mr Campell during the launch of the survey. “About 39 percent of CFOs identified regulation as one of the top five industry concerns.”

The survey was carried out by Deloitte with the idea to provide a better understanding of the current mindset of financial stewards operating across the world.
Respondents from Zimbabwe also indicated that they favour expanding within their region rather than venturing into comparatively unknown parts of the continent.

Moreover, it is the minority of Zimbabwean companies who are looking to expand into the rest of the continent at all.
Just 12 percent of Zimbabwean respondents indicated a desire to expand into the rest of the Southern Africa while a mere 4 percent said they were planning to establish presence in East Africa.

The survey also revealed that most businesses in Zimbabwe are focusing on existing operations as businesses fear to take risks of expanding in the current environment.

This, according to Mr Campell has prevented foreign direct investment, thereby forcing companies to focus on improving the current operations in bid to remain afloat.

He noted that credit monitoring and management processes for customers was the next major risk factor cited by Zimbabwe CFOs followed by margin deterioration due to pricing inflexibility, indigenisation “threat” and market share protection.

Mr Campbell, however, said reducing operating costs, increasing operational efficiencies, disposal of non-core assets and improving investor confidence were the main strategies for business leaderships that are facing the current economic challenges.

He said expansive strategies like venturing into new markets in the rest of Africa, research and development and investing in smart technologies were comparatively low.

On the country’s GDP, Mr Campbell projected economic growth for 2015 to be at around 2,2 percent while giving hope for a bigger growth in the medium to long term.

He said CFOs are generally optimistic of growth going forward, with majority forecasting a flat growth in 2014, a slight improvement in 2015 and significant improvement in 2016.

Former Delta Corporation chief executive Mr Joe Mutizwa said despite the prevailing hardships in the economy, there is room for growth in the long term.
“Everyone knows that we are going through a tough phase in our economy but we must not lose hope because there is room for growth in the long term,” said Mr Mutizwa.

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