FINANCE minister Mthuli Ncube’s economic growth targets of 7,4% for 2021 could remain a pipe dream as the Covid-19 pandemic has hit jobs hard with 45 000 having been lost in an economy that already has a high unemployment rate.
A fresh wave of infections and deaths is currently ravaging the country and has negatively affected the economy.
Zimbabwe National Chamber of Commerce (ZNCC) CEO Chris Mugaga said the first half of 2021 saw companies struggling to meet fixed costs such as wages, resulting in some workers being laid off.
“That should tell you that businesses were trying to readjust especially after the hard lockdown which saw business trying to come back to life but they couldn’t afford the fixed costs especially the wage bill,” Mugaga said.
The ZNCC described the first half of 2020 as a season when industry was dusting itself from the debilitating effects of Covid-19 as the economy was slowly picking up with supply chain disruptions being righted.
Zimbabwe Stock Exchange (ZSE)-listed beverage manufacturer Delta Corporation even reported a 114% revenue growth for the quarter ended June 30 in inflation adjusted terms following significant recoveries in volumes coming from a tight lockdown that affected business in the same period last year.
The company anticipated a favourable year on account of improved agricultural output, the successful rollout of the country’s vaccination programme as well as the anticipated improved access to foreign currency.
Company secretary Alex Makamure, however, highlighted that hope hinged on monetary authorities’ ability to deliver on promises to have the auction exchange rate reflect macro-economic developments.
This comes amid industry-wide concern that the auction system was manipulated and more of a rationing tool.
The company said currency volatility was compounded by multiple exchange rates, hyperinflation and reduced business during Covid-19 lockdowns.
“It is a period where we experienced a level of fragile stability in the sense that there was a modicum or a sense of stability, but which was not sustainable because it was premised on a policy culture which could not sustain the structure of this economy,” Mugaga said.
Confederation of Zimbabwe Industries vice-president Joseph Gunda said industry was affected by the hard lockdowns of early 2021, but showed signs of recovery in the second quarter.
Gunda said power costs and outages coupled with rising costs of fuel also added to operating challenges and costs making it tough for business to price.
United Kingdom-based economist Chenaimoyo Mutambasere said the economy underperformed in the first half of the year with minimal effort for capacity building in the mining sector which is seen as a major driver to recovery.
She said the mining sector suffered from poor working conditions such that bad weather, erratic power supplies and an undocumented supply chain resulted in smuggling or other forms of leakages.
As a result, export data showed a dismal performance in the first quarter of 2021 with gold down 9,6% compared to the same quarter last year.
Mutambasere said energy was crucial as a production input and the government pledged that this would improve in 2021 with the national budget setting aside over ZW$1 billion to improve energy access in Zimbabwe.
From June Zimbabwe Energy Regulatory Authority put in place a 30% tariff hike.
This increased production overheads on strained industries given the Covid-19 lockdowns.
She said fuel prices continued to rise steeply compared to June last year’s 76% for diesel.
“Part of this increase is because of poor performance and an unstable local currency. It’s regrettable that this sector is susceptible to transaction costs from the perceived and realised volatility of the local currency. A sure case for dollarisation can be put forward by looking at the impact of the multi-currency system on the pump price of fuel,” she said.
Data costs also recently went up and Mutambasere argued a 200% hike in the price of data during the lockdown was going to have detrimental impact on the economy.
“When people cannot meet physically then e-commerce becomes essential for business to carry on. Some companies have to have their staff work from home, however if the price of data is too high this becomes restrictive. Another constituency that would be significantly impacted were those in education who might fail to access online classes if the cost of data is prohibitive,” she said.
In the second half, Mutambasere said, as things stand the factors required to attain a growth target of 7,4% in terms of the Treasury targets are all severely compromised before we consider the anticipated shocks from the third and possibly fourth waves of Covid-19.
“While these remain out of the hands of governments given that it’s (Covid-19) a natural global disaster, it should be within the government’s gifting to strive to maintain stability through a clear currency roadmap, cessation of sporadic instrument announcements, support of the informal sector and a thought through response to the pandemic that is fit for purpose for a Zimbabwean infrastructure.”