Catastrophe looms in Zimbabwe

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 infla- tion, 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 supply-chain 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."