There is a bloodbath on the market today as business responded to the government’s decision to suspend bank lending in brutal fashion.
Several companies today issued statements stating that they would be suspending indefinitely credit facilities to their clients owing to the drasting government measure ordering all financial institutions to cease all lending services with immediate effect.
Zimbabwe’s largest sugar producer, Tongaat Hullet has suspended advance payments to indigenous farmers with immediate effect.
In a statement, the company said that the suspension was “in response to the recent announcement by President Emmerson Mnangagwa in which he banned banks from lending.”
The Triangle based company said it was suspending the advanced payments until further notice.
“It is with regret that the millers advise of the immediate suspension of advance payments until further notice. We normally fund the advances from loan proceeds that we access from the banks.”
The stock exchange listed company stated that after the suspension of bank lending by Mnangagwa last Monday, it was left with no option but to also cut the advance payments from indigenous farmers.
“Following the recent suspension of lending by banks we find ourselves unable to continue offering advances,” reads the statement.
Bulawayo based meat supplier, Whosesale Beef, also issued a statement to it’s publics notifying of the “suspension of wholesale beef debtors’ accounts with immediate effect”.
“In the wake of the recent directives put in place by Government barring the extension of loans to all public and private enterprises, please be advised that Wholesale Beff (Pvt) Ltd has suspended all ongoing and new customers’ debtors accounts with immediate effect (11 May 2022).
“During this indefinite period, all account holders with outstanding invoices are requested to clear all balances”, reads the statement.
Also adding to the misery was Surrey group, which in a statement said it was no longer going to offer any credit facility with immediate effect.
The country’s biggest dairy producer, Dairiboard Holdings also issued a statement stating that it would no longer issue a dividend as previously planned owing to the new measures. The Stock exchange listed company said the move was to preserve it’s working capital.
“Given the significant changes in the operating environment, Dairibord Holdings Limited (“Company”) board, at a meeting held on 10 May 2022, has considered it prudent not to pay the scheduled dividend recently announced whose original details are set forth below:
“Announcement date: 28 March 2022, last Date to Trade cum-Dividend 19 April 2022; Shares traded Ex-Dividend 20 April 2022. Last record date 22 April 2022, Payment date on or about 13 May 2022″‘ reads he statement.
‘The changes in the financial operating environment and resultant uncertainty have significantly disrupted the credit markets. This caused the company to revise the announced dividend position supported with the need to preserve working capital for the company. The board will reconsider the dividend position at half year 2022.” Said Dairibord.
More companies are expected to follow suit and it rings alarm bells for the economy.
In simpler terms this means that you as a consumer may fail at some point to access meat at your favorite supermarket as your supermarket would need to pay upfront for the meat; for which it may not have enough money.
It’s prudent to note that most of the FMCG outlets operate on a credit basis system with their suppliers, where they get the goods on credit and sell then pay back at over a certain time period in order to access the next batch of goods.
This means that with a cash squeeze, where the limited amount of money available to retail outlets will be spread amongst all the goods that they need to keep in stock to meet market demand. This may result in shortages, a situation that will result in a blackmarket for basic goods.