FINANCE minister Mthuli Ncube offered no respite to Zimbabwe’s distressed companies which are struggling to stay afloat on the back of an ZW$18,5 billion stimulus package that government announced in May to safeguard productive sectors of the economy from the devastating impact of Covid-19.
By Tinashe Kairiza
The quantum of Zimbabwe’s bailout package, which amounted to about US$200 million at the time of its unveiling, pales into insignificance with what other regional countries offered to rejuvenate their industries, as the global economy takes a battering from the pandemic.
With the World Bank (WB) projecting the global economy to shrink by 4,5% this year due to the impact of the Covid-19, South Africa, the continent’s most developed nation, availed a hefty US$26 billion rescue package. South Africa’s bailout package, also announced in April, is equivalent to 10% of that country’s gross domestic product.
Presenting the 2020 mid-term budget review statement yesterday, Ncube, who underscored the myriad of challenges besetting local industries ranging from prolonged power cuts, widespread job losses and a currency volatility crisis, projected the economy to shrink by 4,5% this year, with the manufacturing sector contracting by 10,8% owing to the pandemic. At the time the Treasury boss announced Zimbabwe’s ZW$63, 6 billion budget for 2020, the manufacturing sector was forecast to grow by 1, 9%, riding on the back of anticipated demand for minerals and improved agriculture yields.
The WB estimates that countries across the continent will lose a staggering US$79 billion in the wake of the coronavirus outbreak, with ill-equipped nations counting heavy losses.
Under Zimbabwe’s ZW$18,5 billion rescue package, ZW$3,5 billion in capital outlays was availed to established companies while ZW$500 million was channelled towards small to medium enterprises(SMEs).
Ncube said: “Government intervened through the Stimulus Package which facilitated a ZW$3,5 billion facility to cater for industry working capital (ZW$3 billion) and SMEs support (ZW$0,5 billion) with expectations to arrest a huge decline.
“As a result, the sector is expected to contract by 10,8% in 2020 against 1,9% originally projected.”
Neighbouring Mozambique, battling to contain an extremist insurgency that flared up earlier this year, will benefit from a US$7,4 billion rescue package that the African Development Bank (AfDB) announced to support countries in their response to Covid-19. The bulk of the resources which Mozambique will receive will be channelled towards the agricultural sector, to cushion its populace from looming hunger.
In April, Zimbabwe also missed out on a US$500 million debt relief fund launched by the International Monetary Fund (IMF) to bolster efforts of the world’s 25 poorest countries to tackle the coronavirus.
At that time, the Treasury boss pleaded for a US$200 million rescue package from multilateral lenders but he was rebuffed.
Notably, the mining sector, which accounts for 60% of Zimbabwe’s export earnings, will shrink by 4,1% as production tumbles due to Covid-19-induced pressures.
Tourism is seen shrinking 7,4% as the effects of the pandemic kick in, with global arrivals set to tumble by 97% by year end.
The Confederation of Zimbabwe Industries has warned of widespread job losses and a sharp decline in industrial output as the economy takes a battering from the pandemic.