South African firms tough it out in Zimbabwe
South African firms are resisting the urge to pull out of Zimbabwe despite an increasingly hostile business climate.
By Agencies |
JOHANNESBURG: South African firms are resisting the urge to pull out of Zimbabwe despite an increasingly hostile business climate in the hope they will be in prime position to benefit from a future upturn.
Once a relatively stable market, Zimbabwe has become a nightmare for foreign businesses in recent years with the annual inflation rate now well into eight figures and the government trying to impose prices for goods and services.
Several Zimbabwe-based South African bosses were hauled before the courts last year for overcharging while they are also having to absorb the impact of a new law forcing them to cede a controlling stake to native Zimbabweans.
But analysts say the dozens of companies -- ranging from mining giants and banks to tourist operators -- which are still clinging on are confident that things are bound to get better at some stage.
"I believe that the decision by companies to stay in Zimbabwe is more of a long-term business strategy than a humanitarian gesture. They are simply positioning themselves for an anticipated economic recovery," said Johan Rossouw, chief economist at Cape Town-based Vector Securities and Derivatives.
Among the biggest still toughing it out is Standard Bank which trades under the name Stanbic in branches throughout Zimbabwe.
"Doing business is very difficult but we continue monitoring the situation in Zimbabwe and our business operations," Clive Tasker, chief executive of Standard Bank Africa, told AFP. "We have no intention of pulling out."
South Africa's largest supermarket operator, 'Pick n Pay,' is also keeping its foot in the door through its 25 percent stake in Zimbabwe's TM chain even though it has not received any dividends in the last four years.
As well as the high street giants, South African mining firms are still clinging on in Zimbabwe despite the ever growing problem of finding parts and coping with constant power blackouts.
"We are in talks with neighbouring Mozambique to import electricity for our mining operations in Zimbabwe," a statement said.
Meanwhile, tour operators are still arranging holidays for thousands of foreigners to visit the country's premier attraction, the Victoria Falls.
Tommy Edmund, chief executive of the Johannesburg-based Tourvest, said the Falls benefitted from its location next to the Zambian border.
"All supplies for the hotel are transported from Zambia, including food and fuel," he said.
"That makes us least affected by the meltdown. We have always been using the US dollar currency, so we did not feel the impact of the Zim dollar collapse."
While few are making much money in the current climate, Rossouw of Vector Securities and Derivatives says many businesses are prepared to absorb short-term losses and avoid leaving the door open for their rivals.
"By pulling out now, companies are likely to find it hard to establish themselves all over again once the situation stabilises," he said. "They also fear opening up opportunities for the competition."
Once a relatively stable market, Zimbabwe has become a nightmare for foreign businesses in recent years with the annual inflation rate now well into eight figures and the government trying to impose prices for goods and services.
Several Zimbabwe-based South African bosses were hauled before the courts last year for overcharging while they are also having to absorb the impact of a new law forcing them to cede a controlling stake to native Zimbabweans.
But analysts say the dozens of companies -- ranging from mining giants and banks to tourist operators -- which are still clinging on are confident that things are bound to get better at some stage.
"I believe that the decision by companies to stay in Zimbabwe is more of a long-term business strategy than a humanitarian gesture. They are simply positioning themselves for an anticipated economic recovery," said Johan Rossouw, chief economist at Cape Town-based Vector Securities and Derivatives.
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South Africa has long been Zimbabwe's biggest trading partner and, according to the department of trade and industry in Pretoria, around 20 major companies and scores of smaller enterprises are still operating there. Among the biggest still toughing it out is Standard Bank which trades under the name Stanbic in branches throughout Zimbabwe.
"Doing business is very difficult but we continue monitoring the situation in Zimbabwe and our business operations," Clive Tasker, chief executive of Standard Bank Africa, told AFP. "We have no intention of pulling out."
South Africa's largest supermarket operator, 'Pick n Pay,' is also keeping its foot in the door through its 25 percent stake in Zimbabwe's TM chain even though it has not received any dividends in the last four years.
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"TM continues to trade under exceptionally difficult economic conditions with procurement being their biggest challenge," said a statement from Pick n Pay. "We continue to support our colleagues and hope for political and economic stability in the near future." As well as the high street giants, South African mining firms are still clinging on in Zimbabwe despite the ever growing problem of finding parts and coping with constant power blackouts.
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The Johannesburg-based Impala Platinum, the biggest foreign investor in Zimbabwe through its subsiduary Zimplats, said it was working out how to circumvent some of the problems it had experienced and was hoping to increase production fourfold by 2010, according to a recent report in the Sunday Times. "We are in talks with neighbouring Mozambique to import electricity for our mining operations in Zimbabwe," a statement said.
Meanwhile, tour operators are still arranging holidays for thousands of foreigners to visit the country's premier attraction, the Victoria Falls.
Tommy Edmund, chief executive of the Johannesburg-based Tourvest, said the Falls benefitted from its location next to the Zambian border.
"All supplies for the hotel are transported from Zambia, including food and fuel," he said.
"That makes us least affected by the meltdown. We have always been using the US dollar currency, so we did not feel the impact of the Zim dollar collapse."
While few are making much money in the current climate, Rossouw of Vector Securities and Derivatives says many businesses are prepared to absorb short-term losses and avoid leaving the door open for their rivals.
"By pulling out now, companies are likely to find it hard to establish themselves all over again once the situation stabilises," he said. "They also fear opening up opportunities for the competition."
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