COMPANIES are reeling under a deepening economic crisis coupled with the impact of the Covid-19 pandemic, financial statements reveal.The severe impact of the pandemic, which had resulted in hundreds of thousands of fatalities globally, has worsened the country’s battered economy characterised by currency volatility, poor business climate, rampant corruption, policy inconsistency and runaway inflation that have decimated incomes and pensions.
Zimbabwe’s listed companies from various sectors of the economy, which include tourism, mining, construction and financial services, have already raised alarm over the devastating double impact of the coronavirus and an ailing economy in their 2019 financial results.
One of the major construction companies in the country, Masimba Holdings, has expressed fears that Covid-19 will exacerbate the already weakened economic environment and subsequently affect its operations.
The company said considering the impact of the pandemic-induced lockdown imposed by the government since March 30 and the debilitating impact of drought and Cyclone Idai, “the operating environment is likely to remain constrained as characterised by continued foreign currency, power, fuel shortages and inflationary pressures”.
Top miner RioZim Limited also pointed out that Covid-19 will negatively impact its future business prospects by way of dwindling revenue inflows.
The mining company said the situation will be compounded by existing bottlenecks posed by the central bank through continuous delays in remitting statutory forex.
“The company has carried out a Covid-19 assessment to arrive at an understanding of its effects on our future business and cash flows. A probability weighted expected cashflow was worked out using four possible scenarios — positive, mild recession, medium recession and severe recession,” RioZim chairperson Saleem Rashid Beebeejaun said in a statement accompanying the 2019 results.
Tourism and hospitality concern African Sun Limited, whose business is derived mostly from foreign travellers, indicated that it lost revenue totalling US$4,2 million after 14 512-room bookings were cancelled due to the global coronavirus pandemic.
This followed decisions by nations across the globe to implement lockdowns as well as cancellation of flights to contain the spread of the virus.
“These measures are weighing on the company’s international business outlook and expected to result in cancellations of bookings or deferrals without concrete dates. Our current statistics have shown that we have had 14 512-room nights cancelled, with a total revenue amount of US$4 219 491 by 24 March 2020,” African Sun board chairperson, Alex Makamure, said in a statement accompanying the 2019 results.
The World Travel and Tourism Council has warned that Covid-19 pandemic could adversely impact travel and tourism by up to 25% this year, the equivalent of three months of tourism activity. Authorities have indicated that the Zimbabwe tourism sector needs a US$1 billion stimulus package to recover from pandemic losses.
Delta Beverages has experienced a series of volume declines owing to the prevailing economic crisis despite recording a 14% increase in revenue for the year ended December 31, 2019.
In a trading update, Makamure, who is also Delta company secretary, said hyperinflation, an unstable exchange rate, limited availability of foreign currency in the formal banking channels, the drought-induced shortages of cereals used in the brewing processes and the shortages of fuel and power disrupted operations and distributions last year.
Regional cement maker PPC says it expects an 80% decline in its Zimbabwean subsidiary’s sales volume in the month of April compared to the same period in the prior year due to the impact of the Covid-19 lockdown.
“CIMERWA and PPC Zimbabwe have partially resumed operations in Rwanda and Zimbabwe in the second half of April. Cement sales volumes in these countries are expected to be around 15% to 20% of the volumes sold in April 2019,” PPC said in a statement.
Financial services firm Standard Chartered Zimbabwe has gone to the extent of advising the government to expedite engagement with international financial institutions (IFIs) to access lines of credit desperately needed to breathe life into the economy.
The bank pointed out that due to the outbreak of Covid-19, 2020 is shaping into another difficult year in Zimbabwe given the continuation of weak fundamentals on the market.
“While the authorities are committed to reducing inflation and restoring exchange rate stability, 2020 is most likely going to be another difficult year due to continuation of weak fundamentals, the impact of the global Covid-19 outbreak and another poor agricultural season. The prevailing headwinds can only be reduced if Zimbabwe re-engages with key global financiers as well as a collective effort by all internal stakeholders to implement broad-based market reforms to address political, social and economic issues,” the bank’s chairperson, Lovemore Manatsa, said.
Zimbabwe Stock Exchange-listed fast foods group Simbisa Brands announced that it is laying off contract workers, putting employees on leave and freezing acting appointments, among other cost-cutting measures.
Finance minister Mthuli Ncube has indicated the country’s economy is expected to contract by 15 to 20% this year through a leaked memo to global financiers in which he was begging for a bailout package in the face of Covid-19.
Economist John Robertson says the current situation is a wake-up call for the authorities to learn a lesson from the current situation by way of managing the economy properly.
“The main lesson is one government does not want to acknowledge. It has greatly weakened all businesses by taking charge of all decision-making functions. Businesspeople have lost the ability to take initiatives because government approvals and licences are needed for everything. We now have a centrally planned economy, but government lacks the skills needed to run it and businesspeople have been demotivated,” Robertson said.