PHILLIMON MHLANGA
A sharp rise in recorded Covid-19 cases in Zimbabwe and the unstable macroeconomic factors will hamper local companies’ turnaround efforts amid a massive plunge in output, low volumes and widening losses, Business Times can report.
Panic has spread within the corporate community and government, given the rising numbers of Covid-19, which have seen imported cases and the local spread of the virus pushing tallies up to more than 4,000 cases with more than 80 deaths.
This means no normal business operations are scheduled especially after a substantial number of employees tested Covid-19 positive.
The spikes are largely confirmed to few hot spots particularly the capital Harare and Bulawayo.
Business is also contending with intensifying economic woes. Economic experts have predicted a brutal contraction of the Zimbabwe economy by close to 20%, the biggest slump in 10 years.
This means more companies will probably be forced to close. Economists and company executives this week said the situation has been miserable for local companies.
And, it’s going to be worse. Economist and opposition Member of Parliament, Tapiwa Mashakada said the economy was on its knees largely due to government’s bad policies.
“Government has created a laissez-faire economy which entails survival of the fittest. Retailers are feeling the pinch of Covid-19 and probably of the wantonly over pricing of goods as demand falls,” Mashakada said.
In a trading update released this week, revenues for retail giant OK Zimbabwe for the quarter to June 30,2020, was 13% below prior year and volumes were 32.7% below same period in prior year.
“The business environment continued to be challenging due to instability in the market,” OK Zimbabwe company secretary, Margaret Munyuru, said this week.
“Currency depreciation resulted in frequent price increases in a situation of limited disposable incomes, leading to subdued demand.”
Zimbabwe’s biggest beverages maker, Delta Beverages’ company secretary, Alex Makamure said: “The trading conditions remain largely unchanged as impacted by Covid-19 restrictions and unstable macroeconomic factors. The impact of Covid-19 is exacerbated by an underperforming economy.”
Zimbabwe’s tax collecting agency, the Zimbabwe Revenue Authority (ZIMRA) expects the Covid-19 situation to worsen, significantly impacting on revenue collection.
“Recovery from the Covid-19 shock is expected to be more gradual than expected as the country continues on level 2 lock down. Going forward into the third quarter of 2020, although lockdown measures were relaxed, allowing registered businesses to operate, business activity is anticipated to remain subdued due to reduced business hours and the risk of rising local infections,” board vice chairperson, Josephine Chitambo said this week.
London based Economic Intelligence Unit (EIU) predicts a gloomy economic outlook for Zimbabwe owing to government’s failure to manage the tumultuous economic environment.
EIU said government could turn to its usual habit of printing more money and introducing it to the market to aid currency availability.
“We expect the money printing scheme to continue this year, as few other avenues are open to the government. This will place further upward pressure on inflation through massive increases in the money supply. We forecast that real GDP will contract by 15,5% in 2020 as foreign-currency shortage, limited investment, company shutdowns, extended power cuts, soaring inflation and lockdown measures to stem the domestic coronavirus outbreak weigh on economic activity,” the EIU said.
Several speakers at the on-going virtual Institute of Chartered Accountants of Zimbabwe (ICAZ) Winter School, which kicked off yesterday, said business leaders should take a fresh look at their exposure to the complex coronavirus pandemic which could compound their woes.
Former Zimbabwe deputy prime minister, Arthur Mutambara told the ICAZ Winter School the pandemic has a major impact on businesses and we have to find ways to mitigate these problems.
“Leadership, show me your to be list, not your to do list. Think about this in the next new normal. Business heads should be technologically driven,” Mutambara said.
CBZ Holdings chief finance officer Tawanda Gumbo said companies should invest in strategic, operational and financial resilience to be better positioned to respond to the pandemic and recover.
“It is important to diligently act on the processes of action when dealing with the truth. We need to understand the truth about the new normal and deal with it perspectively,” the former ICAZ president said.
