Published: 18 December 2013

THE Competition and Tariff Commission (CTC) says it has approved more than 20 mergers for companies in different sectors of the economy this year.

It said the companies were venturing into mergers as they sought to consolidate their viability in the economy that has of late been dogged by liquidity constraints and lack of foreign direct investment.

Economic commentators said firms were resorting to joint ventures and mergers in order to save themselves from total collapse.

"This is the result of an under-performing market. If the economy is faced by liquidity challenges, viability of businesses becomes threatened and as a strategy to ensure that they remain afloat, companies merge," said an economic commentator, Wendy Mpofu.

The Confederation of Zimbabwe Industries (CZI) says in the past three years, the country has received limited foreign direct investment, a situation that has worsened liquidity situation in the economy.

The industry lobby body has over the years expressed concern over undercapitalisation of the manufacturing sector, which needs at least $2 billion to stimulate productivity to competitive levels.

At present, due to cash flow challenges among other fundamentals, capacity utilisation in the manufacturing sector has remained uncompetitive.

In its manufacturing survey report released in September, CZI indicated that capacity utilisation in the manufacturing sector declined to 399,6 percent this year from 44,2 percent in 2012.

An economist Innocent Masauti said Finance Minister Patrick Chinamasa in the 2014 national budget should announce measures aimed at attracting foreign direct investment to improve liquidity in the economy.

Since the liberalisation of the economy and the adoption of a multi-currency system in 2009, Zimbabwe has experienced liquidity constraints.

The economy was liberalised to ease hyperinflation environment the country went through for close to a decade. In light of liquidity constraints in the past few years, local businesses have also merged or entered into acquisitions with their foreign counterparts to consolidate their financial positions.
- chronicle