CONTINUED challenges in making foreign payments might force multi-national companies with subsidiaries in the country to close shop amid revelations that Versapak Zimbabwe is among the early causalities.
According to information obtained by The Herald Business, expanded and extruded polystyrene packaging manufacturer Versapak Zimbabwe is winding down operations after failing to procure raw materials over the past six months.
The company started operating in Harare in 1995 and had grown into one of the leading manufacturers and distributors of expanded polystyrene and printed rigid plastics in the country.
A source familiar with the company said Versapak had not been importing raw materials for “quite some time” and this had crippled its operations.“The problems at Versapak had been double edged; firstly they have been failing to remit payments to the parent company in South Africa resulting in a debt of close to $2 million so naturally they have not been getting raw materials and secondly the talk around the kaylites ban had killed business confidence.”
Last year, Environment, Water and Climate Minister Oppah Muchinguri-Kashiri banned the use of EPS packaging and gave a directive to switch to alternative packaging or risk being levied.As a result, the source said Versapak has resolved to take all its equipment to South Africa although there have been moves by management to take over the company’s blow moulding business.
Versapak Zimbabwe general manager Andrew John confirmed that the company is winding down operations after 21 years in Zimbabwe.“Versapak is winding down its operations in Zimbabwe but at the moment I cannot furnish you with the reasons behind the move. Let me get in touch with those responsible so that they can compile a report,” said Mr John.
There has been increased pressure on bank nostro account balances since late last year as a result of the widespread importation of goods and services into the country against declining export revenue and other foreign inflows.
The strengthening of the US dollar and last year’s fall in commodity prices particularly gold, which is the country’s major export earner, consequently weighed down the country’s export earnings while on the other hand the country’s import bill continued to rise due to growing reliance on imports.
The challenges with nostro-account balances have resulted in delays in international payments and there are growing fears that the country might begin to witness shortages in basic and critical goods such as fuel while at the same time slowing down production due to a lack of raw materials.
As part of the solution to the challenges, the Reserve Bank of Zimbabwe introduced an import priority list in order to correct the mismatch between the expected nostro position, the RBZ has arranged $215million stabilisation facilities from Afreximbank and a European bank while an additional $330 million was under negotiation to enhance production and improve liquidity in the country.
“We have arranged facilities for nostro stabilisation to ensure that the money needed for importation and that is needed to do business is available,” RBZ governor Dr John Mangudya said recently.