CZI bullish on economic performance

15 Jan, 2023 - 00:01 0 Views
CZI bullish on economic performance

The Sunday Mail

Business Reporter

Business activity increased in the nine months to September 2022, while most companies believe they also performed well in the October-December period, according to the Confederation of Zimbabwe Industries (CZI).

In its latest Third-Quarter 2022 Business and Economic Intelligence Report, the business lobby group said the “positive sentiment with respect to prospects of the fourth-quarter” was not surprising given that the period was largely stable.

The last three months of the year are usually a peak period for businesses, as aggregate demand is boosted by increased spending associated with the festive season and annual bonuses.

Capacity utilisation in the nine months to September – which was above 50 percent on average in all sectors, except in the clothing and footwear sector (44 percent) – reportedly “held up nicely”, despite price increases and the consequent tightening of liquidity as Government sought to tame inflation.

Capacity in the tobacco and beverages sector was highest at 69 percent.

According to the report, more “firms registered an increase in output than a decrease across all sub-sectors, except transport and transport  equipment”.

Despite an operating environment that was “incredibly difficult and skewed in favour of the informal sector” in the review period, CZI described economic performance as “encouraging”.

Companies such as those in the transport sector that reported growth saw trading volumes increase by more than 26 percent on average.

Medium to large firms recorded higher percentage increases in trade volumes averaging 45 percent and 44 percent, respectively, compared to small firms, with only 39 percent.

Firms that are relatively newer (24 years and below) also experienced an increase in trade volumes compared to older companies.

However, 34 percent of the firms experienced a decline in volumes in 2022, with sales dropping 32 percent on average.

Of the firms that reported a decrease in trade volumes, large ones were mainly affected.

Agriculture and “other” sectors recorded the highest decrease in volume of 44 percent, while the construction sector had the highest number of firms whose trading volumes remained flat, adds the report.

“Quite reasonable performance given that the first half of the year was very tough in terms of the macro-economic environment; only to improve after interventions by the Government,” said Harare-based economist Mr Carlos Tadya.

While the economy went through a tough episode characterised by rising inflation and exchange rate volatility, bold interventions by Government managed to stabilise the economy.

The measures included doubling the key policy rate to 200 percent to curb speculative borrowing, suspending payments to State contractors accused of manipulating the currency and the introduction of gold coins to mop up excess liquidity.

Overall, more than half (51 percent) of companies surveyed indicated that they managed to create jobs during the first nine months of the year.

A sectoral assessment shows the wholesale and retail business had the lowest proportion of firms creating jobs.

Conversely, the transport and agriculture sectors had the highest ratio of firms creating jobs.

Although job creation was positive, about 8 percent of the firms that created jobs also retrenched, and these are mainly in the wholesale sector, which could reflect casual workers on short contracts.

In terms of profitability, 41 percent of firms made profits in the first nine months of 2022.

“Given that corporate tax in general performed below target, this means that these 41 percent might have registered only very minimal increases,” said CZI.

About 28 percent of the companies indicated that their profitability had dropped, with close to a third of the businesses believing there were not many changes in profitability.

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