ZSE-listed intercity cargo carrier, Unifreight Africa Limited says the deficiency of consistent policies is declining business confidence within the economy. 

In a statement accompanying the Group’s full-year results for the year ended 31 December 2021, Unifreight highlighted that inconsistent policies to control inflation and exchange rates volatility have affected business confidence within the country.

“The effect of rising inflation, volatility of exchange rates, and policy inconsistencies has affected business confidence within the economy,” the Group said in a statement accompanying the full-year financials. 

“Our margins have been pressed by the rising in cost. This rise in cost was mainly because of exchange rate volatility and US Dollar inflation experienced during the year.”

This comes after the Group realised a profit rebound to ZWL 580.6 million from a loss of ZWL 122.5 million in 2020.

Lack of confidence in government policies and the government itself has set a huge setback to the resuscitation of both the Zimbabwe dollar and the economy at large as inflation, skyrocketing exchange rates and excess RTGS liquidity continues to haunt Zimbabwe’s economic environment. 

The government has been passing contradictory policies which waned trust and confidence, a situation that has scaled up behavioural economics to override economic policies. 

Lack of sovereignty and too much politicizing of the RBZ and Treasury has led to miscalculated and grave economic policies. RBZ should pose a certain degree of independence in policy making. However, this has only become reality on paper, not on the ground. 

Track down of inconsistent policies

·         Introduction of Zimbabwe dollar and ban of US dollars

Since the adoption of the Zimbabwe dollar, the RBZ and Treasury have been passing on contradicting policies to resurrect the dying economy. 

Policy inconsistency can be traced back to 2016 when Bonds were introduced under the guise of exporter incentives and provision of change to more considerable USD notes. RBZ further manufactured the reality that the coins were backed by US$200 million which was just a fallacy and in 2019, the bond was announced as the sole Zimbabwe currency while the use of US dollars was criminalised. 

This was when the cat was exposed: that the bond notes were neither an export incentive tied to the value of the export production but a currency per se.  The rapid depreciation of the Zimbabwe dollar which followed thereafter exposed another fallacy of a US$200 million backup as the Bond notes became valueless at every iota of a minute. Authorities failed to do anything to prove that there indeed was a backing facility in place. 

·         Re-introduction of US dollar

As the economic situation became dire barely seven months after the ban, in 2020 government quickly re-legalised the use of US dollars pointing out policies made out of panic than planning.  RBZ and Treasury are largely reactive than proactive with regards to passing policies and during the process, miscalculate or deliberately proffer short-term, one-sided policies that are toxic and wrong. 

·         Ban of interbank rate and its re-adoption

Another inconsistency was manifested when the government banned the interbank rate for RBZ governed auction-rate where it pegged the rates.  This turned soar as parallel market rates ballooned doubling that of the RBZ auction market. Seeing that it had messed up, the government re-authorised the use of the interbank rate in May 2022.

·         Command economics

Despite preaching the gospel of Zimbabwe being open for business and a free economy on paper, practically government’s thirst to dictate economic policies did not cease but rather widened courtesy of statutory instruments that saw the birth of the beast, SI 127 of 2021, an instrument which made it hard for businesses to operate.  Recently, the government denied enforcing price controls to alienate inflation. Surprisingly, it said that it is entrenching the interbank market exchange rate into law making it the reference rate for all economic transactions in Zimbabwe with those found violating the law by discounting US dollar prices liable to face criminal and civil penalties, suspension, or cancellation of business licenses.

These show that Treasury and RBZ make policies haphazardly, unprofessionally, out of panic not planning a situation further distracting economic resuscitation.  

·         Hawkish export retention policies

The aggressive policies are also traced to February 2021 when the government revised the proceeds held by exporters downwards from 70% to 60%, a measure that was carried out without consulting the business community. This was a dire policy given that the business was already facing constraints in accessing the greenback on the RBZ Auction Market due to its scarcity.

·         Contradicting policies about Zim dollar and US dollar use

After the SI 127, the government announced the payment of civil servants partly in US dollars, testifying to the worthless of the local currency on withstanding inflationary pressures. This was not just a testimony that the printers of the ZWL 2,5,10 20, 50 and 100 notes had lost faith in their currency, but also further waned the business community’s confidence in the Zimbabwe dollar. 

This year alone, the government’s panic-driven policies were laid down in May 2022 when authorities reviewed the continued collection of duty in US dollars, paying of civil servants in US dollars though partly and the passing of settlements of foreign currency tax obligations in local currency at ZIMRA’s willing buyer willing seller's rate while shouting the chorus of buttressing the Zimbabwe dollar. This shows a confused government. 

Ratifying the continued collection of revenue in foreign currency is a sign of the government’s complete loss of faith in the local currency that it seeks to anchor. The insistence to have duties, taxes and civil servants paid in foreign currency testifies to the fact that the government does not have faith in local currency as well which it is commanding the market to accept. 

 The passing of settlements of foreign currency tax obligations in local currency at ZIMRA’s willing buyer willing seller calls for the dumping of the auction market rate when pricing products which the government said won't be challenged. 

It is against this background that Unifreight is challenging the government to be serious when propounding economic policies. 

Group’s financial performance

Meanwhile, the Group overturned losses recorded during COVID-19’s 2020 infested year after profit after tax ballooned by 374% to ZWL 581 million from a loss of ZWL 123 million in 2020.

The profit was anchored by monetary loss which dwindled by 84% to ZWL 54 314 from ZWL 330 246 encountered during the comparative period which was heavily affected by record inflationary pressures.

This resulted in the Group’s revenue soaring to ZWL 3 billion from ZWL 2 billion recorded in the full year 2020 despite its margins having been pressed by the rising in costs incurred during the period

“This rise in cost is mainly because of exchange rate volatility and US Dollar inflation experienced during the year,” the Group added.

Tonnage was 0.7% above budget and 22% ahead of 2020.

“This increase in tonnage was a result of new business acquisition and Total Transport & Logistics Solutions average growth of 50% in volume as existing customers recovered from the impact of COVID-19 restrictions.”

Group’s dividend status

The Group declared a dividend of 59 cents per share and the board said it will put a separate announcement giving more details of the payment.

Group’s 2022 outlook

Having achieved a profit in 2020 from a loss in 2020, the Group is confident that it will continue with the upward trend given its latest investment in Zimplow Limited and a more relaxed COVID-19 environment.

The Group also pinned its confidence on the ability of the government to tame down the recurrent inflationary pressures which have made headlines in Zimbabwe.

This is despite four wasted years by the authorities trying to replenish inflation since the reign of the Second Republic in 2017 through a coup de tat. The Group should not pin hopes on government ending inflation after the government fsiled dismally to curtail it since 2018. Currenlty, the country's inflation is back to 3 digits after hitting 191% in June. Inflation is far from ending as long as the Zimbabwe dollar is still in circulation and RBZ remains politically dominated. Finance Ministry and Treasury have been passing on toxic policies as they battle to suppress inflation, toxic policies that have suffocated business operations. Therefore, it is against this background that i encourage the Group not to bank on the government’s ability to tame inflation. This is an unfounded reality. Rather, it should seek alternative ways of survival under an inflationary environment.

To worsen the situation, the nation is heading towards the 2023 harmonised elections. Government has a record of upsetting the money supply during election times to fund its projects. It is not surprising to see more money being pumped into the market as a vote-buying strategy like what was done in 2008, 2013 and 2018 to support Presidential projects.

Besides that, Zimbabwe’s elections are known for being violent with NGOs and independent media pointing out the ruling party, ZANU-PF as chief culprits. This was manifested in the 2002 elections, 2008 and 2018 when live bullets were opened by the Zimbabwe National Army against the undefended public, an assertion Monthlante Comission confirmed. 

If this prevails as well in 2023, business confidence is going to deplete, chasing away potential investors, especially from the democratic western world which calls for free and fair elections.

Therefore, thinking that inflationary pressures will be curtailed remains a debatable issue.

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