Business confidence remains low as the country prepares for the 2018 elections with potential investors, consumers and industrialists adopting a “wait and see” approach pending the results of the plebiscites, Confederation of Zimbabwe Industries (CZI) President, Sifelani Jabangwe has said.
Presenting the Quarterly Business Confidence for the first quarter of 2018, Jabangwe told journalists that despite the high number of potential investors who have frequented the country in the past few months, most of them had adopted a ‘wait and see’ approach up until the election season is over.
“…most economies are usually affected and tend to slow down as general elections approach and Zimbabwe we are not any different. Economic activity usually slows down in election years as the campaign season tends to be distracting and spending slows down.
“Investment also stalls due to uncertainty and the adoption of the “wait and see” by most potential investors and we have all witnessed this adoption evidenced by the vast keenness and multiple delegations that have visited the country in the recent past,” he said.
Jabangwe revealed that on a quarter-on-quarter basis, the situation on capacity utilization has marginally improved and selling price has improved while exports and stocks of raw materials have deteriorated.
He noted that the decline in confidence comes mainly as a result of the uncertainty of currency causing a lot of problems for industry in terms of production and procurement of raw materials.
On a year-on-year basis, the situation on exports has declined while capacity utilization, average selling price and stocks of raw materials have improved and expectations for better performance are significantly high.
“The Situation Diffusion Index (SDI) was -12.2 for quarter-on-quarter comparison and 4.5 for year-on-year comparison, indicating that business leaders feel that the situation of the first quarter of 2018 is worse off compared to the previous quarter but better compared to the same quarter of 2017.
“The Expectation Diffusion Index (EDI) was -16.5 for quarter-on-quarter and 38.5 year-on-year. The EDI results indicate that business managers are pessimistic of the second quarter of 2018. Interesting to note is that the year-on-year Expectation Diffusion Index of 38.5 which indicates optimism for the business managers in the first quarter of 2019,” he added.
Despite the noted improvements as reflected by capacity utilization and expanding economy as shown by the PMI, the results point to a decline in confidence in the manufacturing sector in the first quarter of 2018 compared to the last quarter of last year.
The decline in confidence comes mainly as a result of the uncertainty of currency causing a lot of problems for industry in terms of production and procurement of raw materials.
Jabangwe said his organisation will continue to urge the government to, in the meantime, introduce an importer financed export incentive scheme and gradually liberalize the forex market to allow for the market and forces of demand and supply to sanitize the situation, while we address and come up with a currency strategy.
The composite Business Confidence Index for the first quarter of 2018 stood at -14.4 for quarter-on-quarter and 20.9 for year-on-year.
