Kingdom warns of more company closures

10_rand.jpgJOHANNESBURG - The dollarisation of the economy has exposed Zimbabwe's industry to competition from South African firms, which could see more local companies folding as they lose market share to their better resourced competitors, according to Kingdom Stockbrokers.

In its update for the first quarter of this year released last week,
Kingdom said years of economic decline and de-industrialisation had
weakened local industry leaving most firms unable to withstand
competition from their South African rivals.

Kingdom said: Any price differentials between South Africa and
Zimbabwe that is outside such costs as transport, insurance and
reasonable mark-ups will result in people going direct to shop in South

This means that the local business sector will have to be competitive
enough to stay in business, a situation which is very unlikely given
the decade-long de-industrialisation that has, hitherto, been taking
place in Zimbabwe.

Once a model African economy Zimbabwe has suffered a severe economic
and humanitarian crisis, marked by shortages of food, deepening poverty
and record unemployment as hundreds of companies collapsed —
suffocated by an acute shortage of foreign currency to import raw
materials and machine spare parts.

A power-sharing government formed last February by President Robert
Mugabe, Prime Minister Morgan Tsvangirai and Deputy Prime Minister
Arthur Mutambara to try to end the crisis has taken measures to
liberalise the economy while temporarily replacing the local dollar
with the greenback and a basket of other foreign currencies.

The new measures have brought a semblance of stability in the economy
but Kingdom said the government would have to devise new policy
initiatives to keep companies afloat in the face of competition that
comes with opening up the economy.

In the medium to long-term, government will have to implement
interventionist policies to prop up and protect local industries with
high tariff walls within the framework of the infant industry
argument, it said.

The need to protect local industries emanate from the fact that the
decade long recession and socio-political problems have left Zimbabwe
resembling a post-war (economy).' Kingdom added.


Post published in: Economy

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