eBusiness Weekly
Covid-19, and the measures taken to control the spread of infection, is easily the largest single economic disaster to hit global economy for years, and Zimbabwe is as badly affected as everywhere else although, at present, infection rates are low but the damage from prevention is high.
It is now essential that we start thinking about how we will restart the economy as the threat recedes and how we can keep vast swathes intact during the lockdown and during whatever special measures will have to be in place as the lockdown is lifted, and any lifting is likely to be in phases.
At the top of the economy the damage is less severe. The top four companies on the Zimbabwe Stock Exchange are Delta, Econet, Cassia and Innscor, who between then account for just over half the total market capitalisation, and once we throw in Meikles (now largely an agricultural and supermarket company), OK Zimbabwe and Blue Ribbon we are around 60 percent of market capitalisation.
These giants are all largely in essential sectors, and Econet and Cassia have probably picked up business, at least in the short to medium term, since they are the core of the digital economy that is now holding the rest together.
But all seven, even the digital platforms, are going to be damaged at some stage since the purchasing power and cash flows of their customers will be reduced.
Outside the digital pair, the rest of the giants rely on different degrees on imports and exports, and while essential imports are still moving export trade is reduced or temporarily suspended. So there will be problems there.
But compared to the non-listed smaller businesses these giants are in far better shape and will remain in far better shape. The only really flourishing smaller businesses now in good shape either produce essential food or have shown commendable innovation on switching production to the sort of products everyone needs to buy to keep clean and protected.
The biggest single short-term problem that faces much of the formal economy that is either not considered essential or, at best, semi-essential will be cash flows. They still have staff that needs to be paid, rents that owners will want to collect, taxes that need to be paid and even security that needs to be maintained. And they have little or no income flowing in.
Strategies have to be planned now, even if they are going to be implemented later, to keep businesses afloat, keep the large total workforce with incomes, and then restart the economy.
There is nothing odd about doing this during an emergency. A good example is when Britain was fighting for its life in the Second World War, but there were background committees working out what the country should do when peace came.
A vast part of the future welfare state was planned during the war, along with economic recovery measures and the conversion of war industry to peace.
Banks have already started thinking. In the brief discussions held by leaders of business sector groups with President Mnangagwa last week, the Bankers Association of Zimbabwe at least outlined some of the steps that would have to be taken. Banks are going to have to sit down with many of their customer, from large corporates to informal traders and individuals to reschedule loan repayments and see what can be done to keep everyone afloat.
This, as the bankers have noted, will require changes in regulation rules, at least for a while, to ensure that banks have more access to their capital by changes in capitalisation rules and statutory reserves, and can be significantly more flexible before they have to decide that a debt is a bad debt.
These rules were tightened to avoid problems of over-liquidity and banking indiscipline in some areas, but different times need different rules. But even changes need to be crafted so as not to create new problems or embed instability into a critical sector.
The Government itself is looking at pumping more financial support into the economy, but resources are limited. While some foreign aid will be made available, we need to remember that Covid-19 has hammered almost everyone and that in any case even the aid will come with conditions, starting off with guarantees that it will be used properly are carefully. Zimbabwe’s new reputation for fiscal discipline will help, but that reputation has to be maintained with even higher degrees of transparency, accounting standards and the like.
In fact, some of the State business support probably needs to be channelled through the banking sector.
The Government does not have the bureaucracy in place to consider tens of thousands of applications while banks, thanks to the “know your customer” rules and the data they have on customers and how they handle their revenue and expenditure can make far better estimates of what a customer needs and what they can cope with.
Even restarting the economy will come with higher costs. Covid-19 is unlikely to recede as a threat, even if the actual infection rates can be reduced to very low levels, until effective vaccines are available, and here the World Health Organisation is dampening enthusiasm by stating that the middle of next year is the earliest for those, and even then it might take longer.
So if the lockdown is lifted in steps, and this appears to be a policy the Government is at least considering as it widens very carefully the list of essential businesses and services, businesses re-opening are going to have to consider how to keep both their staff and their customers safe, and that means everything from staff transport and extra expense on simple things like disinfectants.
In some ways farming and mining are in the best position, with their staff on the premises as it were. A mine can maintain an infection barrier around its staff housing and premises, with everyone leaving or entering that barricaded area having to at least undergo temperature testing and maintaining exceptional hygiene levels. Most mines have medical facilities on site and so can monitor everyone closely.
But your average urban business does not have this luxury of being able to partially quarantine staff. They can talk to their workers about staying at home and only coming to work in safe transport, which may have to be provided by the employer, and get everyone to agree that even a sniffle keeps you at home until everyone is sure it is either a false alarm or something more serious. This requires a far greater trust between workers and managers than is usual, and far better communication.
Some sectors are going to be particularly hard hit, with tourism and the hospitality sectors heading just about everyone’s list. These were the first businesses to be hit and will be the last, around the world, to re-open and recover. No one on the planet, for example, is even thinking about allowing bars to re-open and no one is desperate to travel somewhere on their holidays.
So we will need to work out ways that this sector can at least be allowed to survive for several months so that it can operate properly as the threat recedes to levels that Zimbabwe and the world can cope with. That will require money.
No one can predict what is going to happen, but at the very least we can start talking to each other and the productive sectors and the Government can start crafting options and building detailed plans for obvious programmes so that when these are needed they can be implemented quickly, rather than waiting another few weeks for the talks to start and be concluded.
Things are going to be difficult for some time, both because of what is needed to stop Covid-19 and then to recover from the damage that those measures have caused. So we need to be all on the same page and be getting prepared. Unless we do this together we are will sink separately.
