eBusiness Weekly
Business Writer
The latest industry survey dated April 10 conducted by the Confederation of Zimbabwe Industries (CZI), shows that most local business are surviving on hand-to-mouth and depend on consistent revenue generation for working capital.
The country went under a nationwide lockdown on March 30, 2020, with only enterprises deemed essential — such as pharmacies, food retailers and food manufacturers — able to continue operations.
However, the lockdown, which will take a total 35 days if not extended again, left most firms exposed and will struggle to resume operations or get back to normal, once the lockdown is ended.
Working capital is the capital of a business, which is used in its day-to-day trading operations. It affects many aspects of business, from paying employees and vendors to keeping the lights on.
The bills still need to get paid, even if a business is temporarily on pause or employees are now working remotely and not in the office.
Overhead expenses such as utility bills, rent or rates, taxes, insurance fees (and more) need to be addressed, especially if owners expect to get back to business as usual.
According to the CZI survey, based on the responses of 129 firms across all sectors of the Zimbabwe economy, some 76 percent of businesses identified working capital as the biggest challenge they will face post lockdown.
While 76 percent anticipate that they will face problems restarting operations because of lack of working capital, some 65 percent of respondents believe that restarting supply chains after the lockdown will be problematic.
The survey also showed that business is under stress due to lack of operating cash flow as there is little to no revenue generated during the 35 day lockdown period.
Companies highlighted varying degrees of loss of revenue with percentage losses ranging between 45 percent and 100 percent.
Most companies across the sectoral divide highlighted that they have lost revenue due to non-operation or lower capacity utilisation during the lockdown period.
This challenge was indicated by 40 percent of the respondents.
Revenue has also declined due to increased operational costs caused by low capacity utilisation for those firms that are operating.
The loss of revenue has resulted in cash flow difficulties for the companies as they still have to meet their statutory obligations such as taxes, NSSA, levies, NEC subscriptions, rentals, and utilities as well as paying wages and salaries for their employees. This, according to CZI, implies a low income and high overheads business environment.
“The high inflation environment also means that companies cannot keep cash reserves on their statement of position as this will lead to a loss in real value of their reserves,” reads part of the survey.
Debt collection challenges have also exacerbated the situation, with creditors lamenting the fact that because of the lockdown, they are not able to follow up debtors for payments.
This has negative downstream effects on cash flows, they said.
Employees are, however, likely to bear the brunt of working capital constraints as the majority of respondents are not able to pay full salaries to their employees for longer periods during the lockdown.
According to CZI, this shows that business is under stress and operating under conditions of cash flow difficulties.
“SMEs that employ a few workers indicated that they can only sustain wages for a week, while large corporates can sustain payment of wages and salaries for up to a month.
“Only a handful of companies can sustain payment of wages and salaries for two months and this was indicated by a few large corporates constituting 3 percent of the respondents.
