COVID-19 infects Zim economy

….Industry seeks bailout

…..Job losses loom

TINASHE MAKICHI/ PHILLIMON MHLANGA

Industry is negotiating for a bailout package from the government for companies distressed by the coronavirus, which has seen some companies stopping operations in response to the 21-day lockdown declared by President Emmerson Mnangagwa to contain the spread of the pandemic.

Zimbabwe has so far recorded 11 cases of Covid-19 and three deaths.

Confederation of Zimbabwe Industries (CZI) president, Henry Ruzvidzo told Business Times that discussions were currently ongoing with the government to try and find ways to offer relief to the industry as the pandemic’s ravaging effects take a toll. Ruzvidzo did not specify the figure of the package required as CZI is currently in the process of carrying out a survey.

“Discussions are still ongoing and we have since been tasked to do a survey on the impact of Covid-19 on the industry and come up with the extent of losses by the industry,” he said.

“The companies are also required to come up with estimate figures on the losses that they have accumulated so far.

The survey will then be submitted to the government to come up with strategies to assist industry.”

In a weekly survey report, CZI said the pandemic had resulted in market disruptions for the local industry. According to a CZI weekly survey report titled “Tracking the business and economic impact of Covid-19 in Zimbabwe”, 88% of the companies surveyed were affected as they are failing to access source and export markets while 12% stated that they have not yet been affected by the pandemic.

The report by the industry representative body said the supply chains have been disrupted by this global pandemic, as countries are closing their borders and going into national lockdowns in a bid to try and contain the Covid-19 pandemic which has resulted in over 80,000 deaths globally.

The local industry was not spared as 81 percent of the surveyed firms experienced supply chain disruptions which has affected raw materials supply need to keep industry rolling.

In addition, CZI said human capital is of paramount importance for the successful operation of industry and as a result of the Covid-9 pandemic employees and employers have been greatly affected.

Last week, about 16% of firms sent employees on unpaid leave, while the balance sent workers away on paid leave or rotate them to reduce overcrowding and promoting social distancing.

The companies, according to the results of the survey, have lost about 36% of production and trading volumes on average due to disrupted supply chains, temporary closure of firms and reduced workforce.

The CZI report revealed that in an effort to try and mitigate the impact of COVID19 and protect employees, companies have used up to ZWL$ 1,162,142.86 and USD$768,357.14 on average.

Most of the expenses were as a result of purchasing protective clothing which includes, face masks, spraying equipment, disinfectants, hand sanitisers and other protective clothing.

CZI said the cost of mitigating the impact of COVID19 as a percentage of the company’s annual expenditure budget was estimated at 14% on average according to the snap survey. Employers’ Confederation of Zimbabwe president, Israel Murefu said there was need for a bailout package from government and a collaborative effort to find a solution for the businesses.

“The impact of Covid-19 is quite massive because most businesses are closed at the moment and there has been no or minimal revenue being generated at the moment.

This means some businesses are likely going to fold while there is impending loss of jobs,” Murefu said.

Zimbabwe Stock Exchangelisted Simbisa Brands has since laid off all contract workers while there is an impending jobs blood-bath in the tourism and hospitality industry which has taken a knock since the declaration of Covid-19 as a global pandemic. Hospitality group African Sun closed 14 of its properties countrywide.

Cresta Hospitality closed five of its properties saying they would resume operations on July 1. Zimbabwe Congress of Trade Unions president, Peter Mutasa said Covid-19 has impacted on the labour market as it affected global travel and trade thereby the tourism sector.

“Coronavirus poses a serious threat to the well- being of workers and citizens which will affect productivity and demand. If not tamed urgently we may lose skilled labour especially in health services, services sectors and many other professionals,” Mutasa said. He said the lockdown has disrupted all value chains as well as destroying livelihoods.

“As a result most businesses have recorded reduced demand. Many families’ livelihoods have been destroyed especially those in the informal sector. This will further entrench inequality and poverty as many lose jobs and sources of livelihoods,” Mutasa said.

He said recession and job losses loom unless serious inclusive propoor interventions are adopted, calling for a comprehensive economic structural transformation.

“The epidemic has exposed the fault lines of capitalism and neoliberal policies that focus on profit maximisation at the expense of people. We must therefore come up with new economic policies that are pro-poor and pro egalitarian development if we are to wiggle out if this deep crisis,” Mutasa said.

The Chamber of Mines Zimbabwe recently said the sector was facing difficulties in securing inputs for production and replacement capital due to widespread lockdown in source markets resulting in local miners gradually scaling down operations and others putting their operations under care and maintenance.

“The ferrochrome industry has been the most affected with ferrochrome prices coming down to shut-down levels, even lower than those of 2015,” the chamber said. To date most smelters have been put on care and maintenance, with Zimasco having announced its care and maintenance on 25 March 2020.

Portnex has already closed while Afrochine is operating below 50% of installed capacity. The mining sector’s body estimated that mineral production for the second quarter of 2020 may decline by about 60% compared to the first quarter, with revenue losses exceeding US$400m.

The revenue loss for the first 30 days arising from a total lockdown exceeds US$200m, with the estimated loss for gold and platinum of about US$160m, the chamber said.

Potential revenue loss for nickel, ferrochrome, coal, and diamonds for the second quarter of 2020 is estimated to exceed US$100m. The Zimbabwe Stock Exchange (ZSE) warned this week that some companies listed on the bourse have an uncertain future as they have either scaled down or halt operations in response to the lockdown.

“In the unfortunate event that the lockdown is extended, it is likely to put operational and financial pressure on many listed companies. We hope that we will not reach the worst of the pandemic,” said chief executive officer Justin Bgoni, as he urged issuers to trade under caution to protect shareholders and investors during this volatile, uncertain, complex and ambiguous time.