eBusiness Weekly
Misheck Ugaro
Zimbabwe has in recent years seen a steady increase in foreign currency inflows from diaspora citizens. So significant has this line of foreign currency income become that in 2019 it surpassed receipts from notable development partners. While inflows from development partners amounted to US$610 million, diaspora receipts amounted to US$635 million. Projected 2020 development partner receipts had been set at US$677 million, while diaspora receipts were expected to grow in tandem.
The situation above is now likely to deteriorate with a sharp decline of diaspora inflows, increasing pressure to improve inflows from development partner support due to the unexpected impact of the Covid-19 pandemic. The onset of the pandemic has resulted in a large influx of returning residents who have lost their sources of income as the global economy contracts. Those that have remained outside will face serious reductions of incomes leaving no room for sending family support back home.
Given an already high unemployment rate in the country, the return home of many people will exacerbate the situation. This has significant policy implications for the authorities who are urged to come up with an adequate re-integration measures for a seamless absorption of the returnees.
The country faces a daunting twin challenge of a contracting GDP in tandem with the contraction in the global economy and a rising unemployment rate. There is the serious threat of rising inflation arising out of both genuine economic fundamentals reasons as well as from unscrupulous practices by speculators who take advantage of the situation.
On a positive note, however, there is a potential that the returning citizens widen the employment skills base. While many are generally unskilled, a significant number of the returnees were employed for their skills abroad. An example of semi-skilled returnees touches the tourism sector. It has been the most affected by the pandemic globally, but represents an opportunity for the local industry to exploit by targeting the returnees as potential workers.
These have been operating in the various tourism value chains abroad and have visibly been active within the sector particularly on cruise ships and the hospitality businesses. These people also bring with them the much needed international networks that can be exploited in redeveloping and marketing a successful tourism business.
It is in line with this view that authorities are urged to also utilise this opportunity to widen the SMEs sector by enabling small start-ups owned by returnees. The $500 million targeted for the SMEs sector comes at an opportune time and can partly be used for this purpose.
There will be more areas that can be used to absorb the unemployed including services provision. A brief survey of the urban landscape, including growth points, shows multiple little shops with multiple products and services ranging from electronic gadgets (especially cellphones and computers) repairs and reconditioning, electrical installations, motor mechanics and spare parts, transport services and even fashion clothing and cosmetics. They generate significant employment and incomes.
The risk of a rising inflation with its attendant economic destabilising impact on the exchange rate still looms large. As the country approaches the half year and prepares to exit the pandemic lock down period, much anticipation is on the mid-year budgetary review and the resultant contribution it will make on stabilising the economy. Currently the country is already experiencing an unstable foreign exchange market with the local currency unit reaching levels of $60 against the United States dollar on the parallel market, while the interbank market rate is pegged at $25 to the United States dollar. The closure of the air transport sector has also seen the capacity of the country to import foreign notes and coins dwindle which in turn has put pressure on the availability of same for purposes of dispensing obligations against gold producers. This further exerts pressure on the exchange rate.
It is hoped that the summer agricultural planting season will not be impacted by drought and that a normal rainfall season is experienced. The success of the current winter crop planting program is also expected to ameliorate the need for imported wheat thereby lightening the pressure on demand for foreign currency. Further, the Government has recently announced new producer prices that are expected to positively impact on production and hence increasing the country’s output.
◆ Misheck is a former expatriate banker based in several SADC countries and currently works as a Corporate Advisory Services Consultant. He is the founder of Rucabel Investments Private Limited, an investment company based in Zimbabwe. He is a member and past Vice President of the Zimbabwe Economics Society. He can be contacted on (263) 777052004/712808140, [email protected], Linkedin: https://www.linkedin.com/in/misheckugaro, Twitter: @twitcagan.com
