The country’s risk profile, at its highest since independence, has added pressure on Bata, as the company, along with many other Zimbabwean companies, has failed to land foreign financing for the business.
Bata Shoe company is Zimbabwe’s largest cobbler with a factory with about 1600 workers and produces both for the local and regional markets.
Bata Vice President, Finance and Special Projects, Tim Jude, who is based in Switzerland and is in Zimbabwe to asses the country’s economic environment said there were no plans for any major expansion of the business until the situation improves.
Jude was speaking after a closed door meeting with Prime Minister Morgan Tsvangirai.
“We want to see the economy improving because it has been very difficult over the last couple of years. At the moment there will not be any major expansion. We have a factory with 1600 people which already very big. But we have to start working once the electricity, water services are working,” Jude said.
Zimbabwean companies are struggling to survive as credit facilities have dried up while the country risk factor has discouraged external financiers from dealing with local companies.
Bata is currently operating at only 40% production capacity, because the shoe-maker cannot afford to import about 80% raw materials on cash upfront basis.
Managing director Louis Pinto said: “The major constraint is working capital because we need to import about 80% of our raw materials. And because of the country risk suppliers want us to pay cash in advance all the time. We cannot do this because we do not have working capital.”
Bata is not the only Zimbabwean company facing a bleak future. Apart from a biting liquidity crisis, some of the companies have failed to operate at full capacity because electricity, one of the major economic drivers, is erratic.