Stanbic, Old Mutual voice economic concerns

Business Writer

Key financial services institutions voiced their concerns about policy uncertainty that has weakened trust in the Zimbabwean dollar and currency supply bottlenecks in the formal sector.

In its first half results, non-listed Stanbic Bank Zimbabwe, highlighted that “the economy is likely to remain constrained by low business confidence, policy inconsistencies, high inflation, foreign currency shortages, low disposable incomes and unstable energy supply.”

According to the bank’s short-to medium-term forecast, the policy environment and fiscal flexibility are anticipated to remain tight in order to manage these difficulties.

Stanbic Bank chairman, Gregory Sebborn, noted that the operating environment in the country remained challenging owing to numerous bottlenecks such as a slowdown in economic growth; rising inflationary pressures and rising interest rates.

The slowdown was noted by the Bretton Woods Institutions with both the International Monetary Fund (IMF) and World Bank having reviewed the Gross Domestic Product (GDP) growth forecast for Zimbabwe from 5 percent to an estimated 3 percent for 2022 compared to the growth rates of 6-7 percent in 2021.

The slowdown in growth prospects in 2022 is attributed to the erratic rainfall patterns resulting in reduced agriculture output, impact of the Russia-Ukraine crisis in the local economy resulting in increased fuel and food prices, policy volatility which has eroded confidence in the local dollar, and foreign currency supply bottlenecks in the formal sector resulting in continued buildup of the foreign currency auction backlog.

Sebborn noted that annual inflation rose from 60,7 percent in December 2021 to 191,7 percent by June 2022 and mainly attributed to growing fiscal expenditure largely because of grain purchase, foreign currency purchase (for the 40 percent export surrender portion), financing of infrastructure projects, salary adjustments, social service-related expenditures, and other election related expenditure.

“In addition, there is imported inflation stoked by rising international food prices (maize, oil seeds, wheat) and energy products following the Russia-Ukraine conflict. The obtaining interest rate regime is primarily based on the policy to contain inflationary pressures,” said Sebborn.

The economy is likely to remain constrained by low business confidence, policy inconsistencies, high inflation, foreign currency shortages, low disposable incomes and unstable energy supply. The policy environment and fiscal space are likely to remain constrained to contain these challenges in the short to medium term outlook.

Real GDP growth in the Rest of Africa markets, according to Old Mutual Limited, is being stifled by increased inflation and declining currencies, which are caused by both domestic and international reasons.

However, Stanbic chief executive officer, Solomon Nyanhongo, said despite the economic challenges, Stanbic continued to support its customers through the provision of the required funding structures to meet their specific needs.

Some of the availed funds went towards purchase of additional road construction equipment and working capital to fulfill government’s road rehabilitation programme, which will improve the efficiencies with which goods and services are transported within Zimbabwe and into the region.

“The repaving of the Beitbridge-Chirundu Highway, which is the main trade facilitation route between Durban, South Africa and the Northern countries — Zimbabwe, Zambia and DRC is providing employment to communities around the project thus improving rural incomes.

Stanbic disbursed facilities amounting to US$100 000 for the purchase and installation of MRI machines in public hospitals which will go a long way in alleviating the shortage of radiology services in the country,” said Nyanhongo.

He said Stanbic also provided funding in the form of a letter of credit facility to an electrical company to support development of the Green Economy (Renewable Energy and Water Management).

The project is of national importance as it will improve the availability of piped water in the country.