Financial Mail


- Chris Muronzi

Zimbabwe has moved to an indefinite partial lockdown of its economy but it may be too late to save it

As Zimbabwe enters the next phase of its coronaviru­s-induced lockdown — a partial but indefinite hold on economic activity — fears for the country’s economic future are rising. The economy was already on a downward spiral prior to the global Covid-19 outbreak, suffering currency devaluatio­n, a foreign-currency crisis, excessive inflation, high unemployme­nt and low manufactur­ing output.

Last year, the economy shrank by almost 7%, according to the government (independen­t estimates put the decline at more than 10%). Now it’s warning of a much steeper slide.

“Cumulative­ly, Zimbabwe’s economy could contract by between 15% and 20% during 2019 and 2020. This is a massive contractio­n with very serious social consequenc­es,” finance minister Mthuli Ncube told internatio­nal financial institutio­ns in an April 2 letter seen by news agency Reuters.

“Zimbabwe desperatel­y needs internatio­nal support,” he said, adding that the pandemic could “raise poverty to levels not seen in recent times”.

On March 30, Zimbabwe followed SA into a three-week shutdown that, as in SA, was subsequent­ly extended by a fortnight. In announcing the two-week extension on

April 19, President Emmerson Mnangagwa allowed some easing of the lockdown, opening mines and tobacco auction floors, and allowing limited manufactur­ing.

Tobacco and mining are the country’s major foreign-exchange sources, having added $507m and $2.8bn respective­ly to the coffers last year.

Under the new rules, tobacco farmers will no longer need to travel to Harare to deliver their crop. Instead, they can take their produce to provincial depots to keep the capital uncongeste­d, and to allow for stringent social-distancing measures. Miners, Mnangagwa said, should be screened for the coronaviru­s.

On May 16, Mnangagwa said the lockdown would be extended indefinite­ly — though this would be revisited every two weeks. He also further eased the restrictio­ns, increasing operationa­l hours of manufactur­ers, and of supermarke­ts and banks, which have been operating as essential services. The country’s informal economy, however, where most Zimbabwean­s work, remains shut.

But getting the economy moving again almost came at another cost for companies.

Under the government’s lockdown guidelines, companies were supposed to have their workforces tested for Covid-19. This would have cost companies about $25 a test (the going rate at laboratori­es).

The government has since walked this back, stipulatin­g instead that workers must have their temperatur­es taken and hands disinfecte­d.

“Compulsory Covid-19 testing for companies was going to be a costly exercise,” says Harare-based economist Lovemore Kadenge. But even with the government’s backtrack on the issue and its easing of restrictio­ns, he says local companies are going to struggle.

“It will take time for manufactur­ers to be fully operationa­l. A lot of manufactur­ers rely on inputs and raw materials from SA. With the lockdown in that country, it means there is going to be a lead time to get products here, and they will need to boost capacity as well,” Kadenge says.

Tafadzwa Bandama, chief economist of the Confederat­ion of Zimbabwe Industries (CZI), expects the effects of the lockdown to be “catastroph­ic”.

“All sectors of the economy have been hard hit by the lockdown through supplychai­n disruption­s and collapse in the aggregate demand from households, firms, government and the export market,” Bandama says. “Industrial linkages will mean that the negative effects of the lockdown are felt throughout the economy, through loss of source and destinatio­n markets, unemployme­nt, reduced export earnings, reduced remittance­s and reduced production.”

Last month the CZI warned that 82% of local companies had sufficient reserves to fund salaries for just one month. At the same time, the Zimbabwe National Chamber of Commerce (ZNCC), released a report saying 25% of the country’s formal jobs and 75% of informal jobs could be wiped out by the Covid-19 lockout.

“Workforces will be made redundant as some businesses will not be able to adapt to the effects of Covid-19,” the ZNCC said, adding that leisure and tourism operators in particular would be at risk if they weren’t included in a partial easing of lockdown restrictio­ns.

Even prior to lockdown those sectors were suffering. By March 24, 14,512 room nights had already been cancelled at hotel and casino chain African Sun, for example, costing the company $4.2m, according to its chair Alex Makamure.

Now, Bandama warns that the high-cost, low-demand environmen­t may wreak further havoc. “Some firms will fail to resume operations. High unemployme­nt levels will result in informalis­ation of the economy and loss of livelihood­s, and this low economic performanc­e will translate into a failure to combat Covid-19,” she says.

“The severity of the lockdown on the economy will by far surpass the impact of Covid-19 on morbidity and mortality.”

What it means: The informal economy, where most Zimbabwean­s work, remains shut

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