eBusiness Weekly
Golden Sibanda
As the Covid-19 global pandemic ravages the worldwide economy, the impact will have deadly consequences on the Zimbabwean economy, largely the informal sector, which survives on hand-to-mouth incomes, research findings show.
President Mnangagwa two weeks ago declared the disease a national emergency and later decreed a 21-day lockdown, which economists believe will have serious ramifications on the informal sector following the sudden cut of incomes.
According to research done by BancAbc on the economic outlook for the rest of the year in the wake of Covid-19, the pandemic is expected to continue exerting economic and market pressures on many countries globally.
The sources of the economic pressures have been multifaceted including currency depreciation, particularly for most commodity export dependent countries in Africa like Zimbabwe, volatile stock markets and liquidity tightening.
The most affected sectors will be tourism and leisure together with the transport sector, particularly the aviation industry where millions of jobs are sure to be lost.
The Hospitality Association of Zimbabwe (HAZ), expects no less than 90 percent of hotel bookings to be cancelled by year end with 80 percent of bookings having already been wiped out since January.
“Given that the Zimbabwean economy is broadly informal, the impact of lockdown will take a toll on many businesses, which survive from hand-to-mouth,” BancAbc noted.
More than 60 percent of Zimbabwe’s economy is informal while in excess of 75 percent of the economically active population eke out a living from the informal sector, which a 2016 Finmark and World Bank survey estimated to be worth over US $7,5 billion.
For formal businesses, increased credit risk could result in deterioration in loan quality, especially financial service providers like banks.
Potential dramatic decline in commodity prices will hamper export earnings, leading to some mining companies going into care and maintenance.
The Chamber of Mines of Zimbabwe, a fortnight ago, said around US$400 million in revenue will be lost in the first quarter of 2020 while US $100 million had already been lost since lockdowns started across the world to contain the deadly viral disease.
Mining earns Zimbabwe around US$3,5 billion annually, which is nearly 60 percent of the country’s annual export earnings.
The most feared possibility is that
the Covid-19 pandemic gets prolonged, causing widespread disruption to economic activities. The weak domestic activities will
thus be further impacted by prolonged shut down.
Collapse in international commodity prices amid demand slow down will negatively affecting operations of mining companies, which may go on care and maintenance there by suppressing export earnings.
It is expected that the most affected businesses will include manufacturing, construction and real estate, travel and tourism, education, financial services and automotives.
Sectors likely to benefit include agriculture, personal and healthcare medical and health services, food processing and retail, ICT and e-commerce among others.
