Zimbabwe: Financial Results Reflect Ailing Economy

 A FLURRY of financial results have come to the market in the just ended reporting season with the figures projecting a picture of an economy paralysed by biting liquidity problems and general economic decline.

The figures by and large show that the majority of the counters reflected either moderate or negative top or bottom line growth.

Other results showed mounting pressure on the bottom line from increased provisions, high finance charges and negative revaluations reflecting the deteriorating economic climate, analysts have said.

Even property firms such as Zimre Property Investments are signing the blues.

ZPI chief Edson Muvingi laid bare the problems besetting his company when he presented his company full year numbers to December 2014. Although his disclosures were confined to the property sector and his company in particular, the problems he highlighted had a familiar ring and touched on the broader economy.

He said tenants had failed to pay rentals; the company had property voids and rising debtors. It was the same story to an extent, but with a different setting.

Muvingi said his company was contendingith high levels of debtors. "We are just like banks who are also lending to people who might never pay back," he said.

And when it comes to recovering such debts, companies are getting no joy.

For instance, Muvingi said auctioneers have run out of storage space for furniture. Against such a background, attaching property is no longer a good idea.This, analysts say reflects the liquidity problems in the country.

Instead of attaching property, opting for payment terms was a much more prudent way, Muvingi said.
The problems highlighted by Muvingi are not confined to property companies alone.Additionally, tenants are demanding lower rents, he said.

Even banks have to contend with such problems of bad debts.
The Reserve Bank last year said non-performing loans (NPLs) stood at almost US$800 million.

An NPL is when payments of interest and principal are past due by 90 days or more, or at least 90.
A special purpose vehicle, Zimbabwe Asset Management Corporation (Zamco), was set up last year to deal with bad loans.


Zamco intends to clean up and strengthen banks' balance sheets and provide them with the liquidity to fund valuable projects for the economy to rebound and to mitigate loss of confidence.

MMC Capital warned in July that the cut back on lending would "have a huge bearing on the economy as the reduced credit supply will lead to working capital challenges and in many instances businesses" failing to fund capital expenditure.

"The net result will be a decline of private gross fixed capital formation and private consumption which in turn will negatively impact on economic growth," MMC said. "In a high NPL environment, banks increasingly tend to carry out internal consolidation to improve the asset quality rather than distributing credit."

A number of financial institutions have obtained writs of execution to attach property to recover the money from defaulting clients.

Every week, national newspapers are awash with auction adverts.