Business Reporter
Throughout the year, companies have faced various operational challenges stemming from a difficult operating environment.
These difficulties have manifested differently across sectors, prompting individual companies to adopt survival models aimed at sustaining operations and profitability.
Current Financial Outlook
In the recently published financial reports for the third quarter of 2024, many companies expressed uncertainty about the future, with no immediate relief in sight regarding operational challenges.
For instance, Masimba Holdings, a construction firm, indicated that the macroeconomic environment is expected to remain tight due to contractionary fiscal policies and ongoing pricing distortions caused by exchange rate discrepancies. They stated,
“However, we believe that securing sustainable financing for infrastructure development projects underway nationwide will anchor sustained growth and contribute to tangible socio-economic transformation.”
Despite these challenges, Masimba Holdings forecasts remaining profitable for the financial year ending December 31, 2024.
National Foods highlighted key economic issues, particularly cost pressures resulting from changes in the Value Added Tax (VAT) status of many products, which have shifted from “zero-rated” to “exempt.”
This change means that VAT incurred in production is no longer deductible, effectively increasing production costs. They noted,
“In essence, the VAT incurred has now become part of the cost of production, compressing margins.”
Additionally, the company pointed out the rapid rise in operating costs, especially in power and human capital, stating,
“The supply of power became increasingly unreliable during the period, necessitating greater reliance on expensive backup power.”
Strategies for Improvement
To navigate these challenges, National Foods plans to focus on improving procurement and operational efficiencies to enhance margins. They also aim to build on the positive momentum in their newer product categories, such as cereals, pasta, and biscuits.
Tapiwa Karoro, President of the Zimbabwe National Chamber of Commerce (ZNCC), emphasized that Zimbabwe’s economic landscape and high production costs pose significant barriers to the competitiveness of local products in regional markets.
He noted that high energy costs, currency volatility, and infrastructure limitations contribute to these challenges. Karoro suggested that companies could mitigate energy costs by investing in solar energy systems and energy-efficient machinery. He stated,
“Companies can also explore public-private partnerships (PPPs) or collaborate with renewable energy providers to reduce costs.”
Embracing Digital Transformation
Companies are increasingly embracing digital transformation as a critical strategy for cost efficiency. Econet Wireless is focused on leveraging emerging technologies to enhance its service offerings, stating,
“The modernised network will provide increased network performance as well as unlocking new capabilities that will allow the business to offer new, exciting, and personalised services for our customers.”
Karoro also highlighted the importance of adopting digital tools for inventory management, procurement, and customer engagement, which can streamline processes and reduce expenses.
He suggested that government support for digital infrastructure, particularly in rural areas, could extend the benefits of digital solutions to businesses across the country.
Conclusion
As companies navigate a complex policy landscape and high operational costs, the focus remains on finding sustainable solutions.
With ongoing efforts to enhance efficiency through digital transformation and strategic partnerships, businesses are striving to adapt to the challenging economic environment while maintaining profitability.
Zim GBC News©2024