Consumptive spending unable to arrest economic decline

Although inflation and remittances from Zimbabweans abroad will continue to fuel consumptive buying, this will not be able to counteract the now severe economic contraction.

Delta Corporation, the country’s biggest beverages manufacturer which has a monopoly in the manufacturing of both clear and opaque beer as well as carbonated drinks, says inadequate investment over more than a decade, has taken its toll and the damage is beginning to be seen in roads, rail, telecommunications and electricity.

It says the economic recession, which has seen gross domestic product decline by about 25 percent over the past three years, will be severe unless the “first faltering steps of policy change” announced by the government in February grow into major changes.

The changes included the review of the exchange rate, the introduction of new prices for fuel and the removal of price controls. The company also says the open dialogue between the public and private sectors, which seems to have encompassed the opposition, could assist in the crafting of appropriate economic policies.

But the damage is already so great that it will take time for the economy to recover. The transition period, it says, will be painful with high inflation, falling employment and reduced domestic demand. So far, the company has benefitted from increased domestic demand which has been buoyed by high inflation, negative interest rates and remittances from abroad.

Its sales for the year ending March shot up from $44 billion to $103.7 billion. Net profit shot up from $5.6 billion to $22.4 billion. The company says these results are most satisfactory because the soft drinks operation did not contribute to the profit at all because of price controls.

It was also forced to import 16 000 tonnes of barley to ensure continuity of supply. Its stocks have increased by almost 500 percent. It says the recent removal of price control on soft drinks should help it to improve margins.

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