Zimbabwe’s industrial firms have found a way to survive the impact of Covid-19 and captains of industry have capitalised on strong aggregate demand across sectors to grow volumes and operations.
Lafarge Cement chief executive officer, Precious Nyika, was among industry executives who admitted that despite the lingering negative impact of Covid-19, the industry was registering growth across all its sub-sectors.
Nyika was speaking during a mid-term budget and economic performance review panel discussion organised by Business Weekly newspaper and Zimpapers Television Network (ZTN) in conjunction with the Confederation of Zimbabwe Industries (CZI) on Wednesday.
Speaking during the same event, Finance and Economic Development Minister Mthuli Ncube said the Government remained confident that growth this year would remain strong, in the face of Covid-19, riding on the low base effect, after two consecutive years of recession.
Zimbabwe has operated intermittent national lockdowns, since March last year, to contain the pandemic, culminating in the latest relaxed mode of the level four lockdown, adopted a month ago.
Restrictions ranged from reduced business hours, suspension of certain activities, restrictions on gathering, movement, intercity traveling, and trading among others, which negatively impacted business operations. She said according to the business intelligence survey conducted by the CZI, average industrial capacity grew to 46 percent in the first quarter towards a year-end target of 61 percent.
For instance, Nyika noted that her company’s cement business registered a 20 percent growth in volumes, which saw the company reach full plant capacity, on account of improved power availability.
Among other sectors impacted positively, Nyika said the construction sector realised significant benefits from the Government’s decision to invest 33 percent of the budget in infrastructure.
Resultantly, a construction boom cutting across roads, dams, bridges, schools, health institutions, and other Government facilities is expected to significantly drive projected growth of 7.8 percent this year.
“What we saw in the first half of the year, 2021, of course, we saw the third wave of the pandemic, we saw significant lockdowns in January and February. From a business perspective, that meant restricted working hours, restricted travel, restricted movement of goods and services.
“And that could have led to suppressed demand, but the surprising fact is that quarter one and quarter two, demand has actually been stronger in 2021 than what it was in 2020.
“What does that tell us, it tells us that business has found a way to adjust to Covid-19 lockdowns and has found a way to survive through those lockdowns and still be able to sustain,” she said.
Nyika pointed out that the 2020 first half was constraining for business because of the lockdowns, with many people and corporates caught unawares, which left most of them in a state of shock.
“We celebrate the vaccination that has happened in the first half as business, I think you see businesses across the country taking a stance on their vaccination approach and helping to support the drive for people to be vaccinated,” she said.
The Lafarge CEO said the rapidly progressing vaccination program, once herd immunity is attained, will allow the country to return to a more normal environment, opening up economic stability, Nyika said falling inflation, which touched a two-year low when falling to 50,37 percent in July from 106,6 percent in June, will hold down prices and make it easier for businesses to plan.
She said according to information from CZI, a stellar agricultural season, which saw record output for maize, had improved disposable incomes and strengthened aggregate demand. Improved power supply and fuel availability, especially for most of this year, she said, has assisted businesses to increase capacity utilisation, and resultantly ensuring stable and higher production volumes. The Zimbabwe Stock Exchange market cap growth, from $228 billion in August 2020 to the current $800 billion, though partly reflecting the effect of inflation, had demonstrated confidence in local firms, now a popular investment alternative. Nyika noted the challenges of limited availability of foreign currency on the auction system, which she said negatively impacted the ability of business to reorder, recapitalise and run operations smoothly.
In addition, Nyika said the disparity between the official exchange rate ($85/US$1) and the open market rate ($145/US$) caused market distortions that posed major challenges for businesses. Notably, though, Nyika said while businesses have largely found a way to skirt around the challenges of Covid-19, the respiratory disease had increased operating costs incurred through testing employees, procuring protective equipment, and requirements for staff to work from home.
She said although businesses have not been able to create new jobs due to Covi-19 constraints-only 13 percent of survey respondents were able to do so, remarkably, the majority (80 percent) did not shed any jobs. “If you look at all of the indicators that I have mentioned, they are pointing towards growth, and then there are some challenges there. But when we talk about business growth, we do not talk about growth without challenges,” Nyika said.
“We expect to rise from the challenges we have next season, and challenges from the past season were power, forex access, inflation, a stock exchange that was not functional, a bad agricultural season, Covid-19 crisis with no end in sight, all of that.”
Nyika noted that businesses needed to continue to be dynamic and evolve with time to be able to adapt to new and more mature sets of challenges, which profit enterprises should be able to deal with.
In his opening remarks during the panel discussion, CZI President Henry Ruzvidzo said the industrial lobby noted with the appreciation they made into the national budget and midterm review, had been considered.
Ruzvidzo said the policies enacted by the Government helped to steady the ship during this difficult time.
The macro-economic stability achieved so far, he said, in the 2021 budget also helped businesses to plan and to reinvest.
“Protecting the stability is important for the growth of the economy and indications from the second half of last year and the first half of this year, from the surveys that we have done, would indicate that industry is on the rebound; capacity utilisation has actually been improving Ruzvidzo said average capacity utilisation was projected to continue improving in spite of challenges posed by Covid-19 related restrictions, aimed at containing spreading of the respiratory disease. Some concerns have, however, been raised by businesses with respect to the auction system, which has been a game-changer for our sector; much more work remains, to make the auction more efficient and generally accepted by both generators and users of foreign currency. – Business Weekly
