Enacy Mapakame : Business Reporter
NEARLY 1 000 people were retrenched as 13 companies liquidated during the first quarter of 2016 on depressed manufacturing activity, according to the Reserve Bank of Zimbabwe (RBZ) quarterly economic review. The majority of the companies cited restructuring and downsizing operations, viability challenges, redundancy and judicial management as reasons for retrenchments and outright closures.During the same period in 2015, 17 companies were liquidated reflective of the challenging economic environment. In the period to March 2016, a total of six companies were placed under judicial management compared to 11 during the same period last year.
“During the first quarter of 2016, a total of 949 retrenchments were witnessed, compared to 1 011 over the same period in 2015,” said RBZ.
This comes on the back of a slowdown in the manufacturing sector and poor agriculture production in the 2015 /16 season due to effects of the El Nino induced drought. In the first quarter of 2016 business confidence in the country remained low.
Capacity utilisation for the manufacturing sector dropped 2,2 percentage points to 34 percent in 2015, according to the Confederation of Zimbabwe Industries (CZI) 2015 manufacturing sector survey report.
“The sector’s performance largely mirrored the subdued economic activity across the country.
“Production during the quarter under review was also depressed as companies had built large inventories for festive season in the last quarter of 2015, which took time to clear,” said RBZ.
Adding on to that, consumers shifted towards more affordable brands and imports in view of the weakening regional currencies against the greenback.
On the other hand, agriculture sector, which feeds an estimated 70 percent of raw materials required in manufacturing sector was severely affected by drought resulting in significant write offs as crops succumbed to moisture stress.
Resultantly, the sector is projected to decline by 9,9 percent in 2016.
Since dollarisation in 2009, companies have struggled to raise capital on the back of high costs of borrowings resulting in them being riddled with debt.
Listed firms constantly sought financial aid from shareholders through rights issues while others resorted to borrowing, which in some cases proved unsustainable resulting in massive liquidations.
Some of the companies that have liquidated or were placed under judicial management include, textile giant David Whitehead, Belmont Leather, Hamilton Properties, Kitchen Box, Zimasco, Universal Component, Border Timbers, Archer clothing, Steelnet and Gulliver.