CBZ Holdings says inflationary pressures buffeting the domestic economy will render most local firms less competitive as overheads surge while the mining sector may record easy pickings.
BERNARD MPOFU
As plans to operationalise the African Continental Free Trade Area gather steam, experts have warned that this initiative will paralyse some industries in weaker economies.
In its latest trading update for the quarter ending 31 March 2020, CBZ said supply chain disruptions caused by Russia’s invasion of Ukraine in February would hurt Zimbabwe’s economy.
“Rising global geopolitical tensions are expected to continue exerting both upside and downside risks to the economy. In particular, mining and other export-oriented sectors are likely to benefit from firming commodity and food prices on the global markets,” Rumbidzayi Jakanani, the CBZ Holdings company secretary, said in a statement.
“However, rising prices for oil, fertilisers, and other critical imported raw materials, will translate into higher domestic production costs, thereby adversely impacting on competitiveness and viability. Measures that limit the adverse impact of the external shocks, should therefore be prioritised. The group will continue to monitor the above-mentioned macro-economic developments with a view to better manage emerging risks and opportunities.”
Globally, the first quarter saw the easing of Covid-induced restrictions as countries opened up economies and co-existed with the respiratory virus. This allowed business to resume, as well as scale up operations.
However, the period was also characterised by a surge in global inflationary pressures, which somewhat constrained demand and consumption, as central banks tightened monetary policies while economic agents reprioritised expenditures and shifted investment behaviours.
In Zimbabwe, inflationary pressures were fuelled by rising global oil prices as well as currency weaknesses.
The country’s inflation is dramatically surging to three-digit figures after jumping to 131.7% in May from 96.4% in prior month. The central banking sees annual inflation hovering between 50% and 70% by year-end on account of tight monetary policy among other measures.
But economic analysts and some captains of industry say this may not be achievable in the short to medium term.
