Industry in race for post-Covid recovery

BY TAURAI MANGUDHLA

INDUSTRY is racing to recoup lost business from the debilitating negative effects of the novel coronavirus which decimated the economy in the first quarter of the year.

While business was still coming to terms with the nine-month long lockdown in 2020, industry was thrown at the deep end again this year on January 5, when fresh restrictive measures were introduced to curb the spread of Covid-19.

The first two months of the year are critical to economic performance in the first quarter of the year and lack of business means millions of dollars are lost.

However, it seems there are still more hurdles to conquer as threats of a third wave are already simmering. Hope for economic stability hinges on the Covid-19 vaccination programme with a targeted 10 million people expected to receive the doses for the nation to achieve herd immunity.

Zimbabwe also continues to face budgetary constraints at a time when financial resources are required to fight the pandemic.

Although the Zimbabwe Revenue Authority (Zimra) said the economy stabilised due to price and currency stability, the Covid-19 pandemic-induced lockdown resulted in a sluggish start to economic activities.

Zimbabwe Stock Exchange (ZSE)-listed Axia Corporation limited said the operating environment was uncertain due to the pandemic.

“The supply of key raw materials is stable although there could be logistical challenges arising from the Covid-19 restrictions,” Axia said in its interim results statement for the period ending December 2020.

The company said the Covid-19 infections rose sharply towards the end of December, resulting in the death of some of its staff members.

“The government of Zimbabwe implemented level 4 lockdown from January 5, 2021. The lockdown measures reduced economic activity as there were disruptions to normal business operations. The group’s retail business, TV Sales & Home, was significantly affected as it was not fully operational whilst Transerv and DGA were operating at reduced levels with minimal staff as they are part of essential services,” Axia said, adding that the regional distribution businesses were not affected as they continued operating with no effective lockdowns in Zambia or Malawi.

Axia said the impact of Covid-19 on businesses was significant.

“The group remains resilient and determined to withstand the risks associated with Covid-19. There are many uncertainties that make it difficult to fully estimate the full impact of the Covid-19 pandemic on the financial health of the group entities. At present, the financial status of the group remains healthy, and the impact of the Covid-19 has not created any issues from a solvency or liquidity perspective,” Axia said.

ZSE-listed Innscor Africa Limited said the group was not spared during the second wave of the pandemic, which claimed some of its workers.

The group said in line with approved protocols and regulations, it will shortly embark on an initiative to offer free vaccination to its staff.

Innscor said it would continue working with financial institutions to optimise the quantum and cost of debt deployed across the group.

National Foods Limited said given the ongoing uncertainty around the impact of the Covid-19 pandemic, it was difficult to measure the pandemic effects for the year ending June 30, 2021.

At present, however, National Foods said Covid-19 has not created any solvency or liquidity issues.

“The improved economic stability has persisted into the current period, and although the business environment remains complex and challenging, the progressive improvements in the state of the economy are most encouraging,” National Foods said last week in its interim statement for the period to December 2020.

Zimra acting commissioner-general Rameck Masaire said the lockdown affected tax collections.

“The government has given the green light to the informal sector, which will go a long way in supporting the formal businesses.

“We have also noted the arrival of vaccines and the possibility of companies acquiring the same, which brings confidence to business. Therefore, going forward, the impact to tax collections will be minimised by the re-opening of the economy and prospects for a better future,” Masaire said.

“Indeed, the lockdown resulted in reduced tax revenue inflows, a position that we are currently attending to in order to recover the outstanding tax revenue,” he said.

Going forward, Masaire said pay-as-you-earn (PAYE) and value added tax (VAT) on local sales were likely to perform better.

“Despite the lockdowns the obligation to pay salaries remains, hence collections under individuals (PAYE) are not affected significantly. Covid-19 has led to a boom in demand for digital services and goods as society tries to maintain social distancing. This demand has sustained VAT on local sales as some transactions were done online and boosted collections under excise duty on airtime as some companies adopted the ‘new normal’ of working from home which requires data for connectivity,” he said.

Economist Chenayimoyo Mutambasere said the Covid-19 pandemic had already cost many jobs and would erode disposable incomes.

Mutambasere said the closure of land borders had negative effects on the economy given that thousands of households rely on border trading.

“One school of thought suggests that this closure of land borders should increase purchases of locally produced goods. However, this benefit is short-lived when one considers the reasoning behind cross-border trading.”