Companies in Zimbabwe have started to withdraw declared dividend payouts and halting advance payments to suppliers as the fallout from President Emmerson Mnangagwa’s directive that banks stop lending ripples across the economy.
Amid much criticism, the government of Zimbabwe is pressing ahead with its temporary suspension of lending services by banks. The Financial Intelligence Unit further tightened the noose on banks, asking banks to “disclose suspense and other internal accounts” in a directive dated 11 May.
“Some banks may be using suspense and other internal accounts for purposes of purchasing foreign currency on the parallel market. Every bank is required to furnish to the FIU a list of all the suspense and other internal accounts,” Oliver Chiperesa, a director general of the Zimbabwean FIU wrote in the letter.
The effects of the new monetary measures have been rippling beyond the banking sector. Listed companies that had already declared a dividend have started to scrap the payout for the dividends, citing the need to preserve cash in the aftermath of a possible credit crunch arising out of the government’s directives.
“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,” ZSE-listed diversified consumables manufacturer, Dairibord Holdings, said on Thursday.
A unit of Edgars Zimbabwe has also suspended credit advances while Surrey, a big livestock processor has stopped farmers from bringing produce to its abattoirs. Sugar processors, Triangle and Hippo Valley – both controlled by Tongaat Hulett – are also stopping advance payments to cane growers.
“It is with regret that the millers advise of the immediate suspension of advance payments until further notice,” James Bowmaker, chief operating officer for Tongaat Hulett Zimbabwe, said in a letter to cane farmers, citing the suspension of lending by banks.
“Following the recent suspension of lending by banks, we find ourselves unable to continue offering advances. We normally fund the advances from loan proceeds that we access from the banks,” explained Bowmaker.