ZIMBABWE’S largest fast food chain Simbisa Brands has warned that the country’s high interest rate and tax regimes may choke the economy in the medium term as companies battle to stay afloat.
BERNARD MPOFU
Monetary and fiscal authorities have over the past few weeks announced several measures to tame inflation and stabilise the domestic currency such as hiking interest rates to discourage borrowing for speculative purposes.
Already, Finance minister Mthuli Ncube has hinted that Zimbabwe may soon review its economic growth estimates due to several internal and external headwinds buffeting the economy as International Monetary Fund and independent estimates project a sceptical picture of the current growth targets.
Ncube recently revised the economic growth projection to 4.6% from 5.5% despite maintaining a bullish outlook in the mining sector, the country’s key economic driver, accounting for more than half of export receipts.
Simbisa, in its financials for the full year ending 30 June, says while measures announced by the authorities will stabilise the domestic currency, high interest rates would slow down economic activity.
“The group commends efforts by the Reserve Bank to stabilise the country’s local currency in the period after the Group’s reporting date,” the company says.
“However, the Group urges the Reserve Bank of Zimbabwe to review minimum productive sector lending rates which are currently set at 200% as this may stifle growth in the medium term.”
The group’s Zimbabwean operation, the financials show, continues to generate all its foreign currency from the sale of products in the local market in line with the prevailing multi-currency framework and therefore does not have access to the Reserve Bank of Zimbabwe foreign currency auction system. Going forward, the group says it will embark on an aggressive drive to expand its branch network in the region to grow foreign currency revenues.
“The upcoming financial year has exciting prospects for the Group. The Group has a significant pipeline of new stores and expects to open 87 new stores in FY23 [full-year 2023], mainly in Zimbabwe (45) and Kenya (30) at a cost of about US$23 million,” the company says.
“There is a dire and urgent need to address the current and unnecessarily punitive Taxation laws in particular Intermediated Money Transfer Tax (IMTT). In the Regional businesses, global inflation will continue to be the single biggest factor influencing the group’s plans. The Board is confident that the measures put in place by management in the respective countries to address these challenges.
