THE year 2020 has been a very difficult one, with the outbreak of Covid-19 hitting hard on an already ailing Zimbabwean economy.A plethora of challenges will see the economy contracting by about 4,5%, with consumer confidence remaining low while year-on-year inflation, at 401% in November, is projected to end the year at 336%, the highest in Africa.
Companies reported huge volume declines due to high annual inflation, which averaged 655%, while households struggled with declining buying power.
This was compounded by the fact that over 50% of the population already lived in extreme poverty, even before the pandemic hit the economy.
Overally, business faced a lot of challenges, including declining consumer demand, low capacity utilisation, foreign currency shortages, fuel shortages, exchange rate losses and rising costs of doing business.
Many companies closed shop.
Some of the worst affected sectors included the Tourism and Hospitality and Transport and Delivery industries.
Unemployment levels also rose with the Employers Confederation of Zimbabwe estimating that up to one million jobs were lost as a result of the pandemic.
Production from the country’s top export earners (tobacco and gold) plunged by more than 15% due to viability challenges and side marketing.
Given Zimbabwe’s economic situation before Covid-19 induced lockdowns that saw production ceasing, economists believe it’s a miracle that some industries still remain running.
An economic analyst Victor Bhoroma said the challenges far outweighed successes in 2020.
He said the introduction of the forex auction system and the re-dollarisation impetus stabilised the market as most producers and retailers now get foreign currency directly from consumers.
“This has stabilised the parallel market rates and maintained the spread between the fixed auction rate and the open market rates. There are not many successes I can think of besides the operationalisation of the Zimbabwe Investment and Development Agency and (changing) foreign exchange regulations to allow consumers to use foreign currency. The latter improved the fuel supply situation and brought confidence and certainty in the market,” he said
A market analyst George Nhepera said while 2020 can best be described as a year of unprecedented developments related to economic recession and the pandemic, it was indeed an “economic miracle” that the country is still standing relatively better than expected.
“Our major success has been exchange rate stabilisation which contributed to monetary and price stability. Our local currency is slowly gaining all its normal functions of being a medium of exchange, unit of account and store of value. This was unthinkable when the year started but it is now a reality. Another notable milestone is the surplus positions achieved both on the national budget and balance of payments during the year which has greatly improved the economic standing of the country relative to its peers in the region,” he said.
Nhepera, however, added that there were still challenges on the foreign investment front, as well as the restoration of social services such as health and payment of real wages and salaries for workers.
“While our inflation has started to reduce significantly, which indeed is a good economic sign, it is still a cause of concern bearing in mind that our neighbouring countries such as South Africa and Botswana are currently enjoying single digit inflation levels,” he said.