By Caroline Nyamayaro:
Small to Medium Enterprises (SMEs) are bearing the brunt of the hyperinflationary operating environment, with many closing shop or increasing their prices weekly to keep afloat in the volatile economy.
Zimbabwe has been going through an economic crisis for the past decade but more pronounced in the past two years seen through the twin problems of liquidity crunch and rising inflation. Small businesses have become victims as they relied on short-term loans and walk-in clients who bought on cash.
One small business operator said: “We are feeling the knock of hyperinflation and now most have started to resort to smuggling as a measure to maximise profits by avoiding statutory taxes. I have also started reviewing my prices on a weekly basis to cushion myself against the ever-rising forex change rates.”
Many Zimbabweans have been finding it difficult to withdraw their money from banks, leaving them to rely on electronic payment which many business operators do not like or charge a premium on such sales.
Economist John Robertson says hyperinflation damages investment in that it makes business decision making extremely difficult because of uncertainty.
“Before investment, investors need to know what it will cost to do a business and what are the wage cost, interest rates and rentals. All these have to be accurately calculated before commencing operations. Otherwise, it becomes very easy to make a huge loss because of the instability. As a result, investors rather opt to invest in other countries where inflation is not a problem,” Robertson said.