Riding the high wave of Covid-19 in 2021

HARARE – 2021, much like the preceding year, was defined by the coronavirus pandemic, but there was some semblance of progress as restrictions were eased to allow events such as sports to resume.

Business trading hours were also increased.

By Golden Sibanda

As vaccination campaigns around the world picked up pace, countries relaxed Covid-19 restrictions, which improved global travel and freed supply chains.
All this positively impacted on the global economy.

For much of 2021, Zimbabwe’s economy showed incredible resilience and is projected to grow faster than many parts of the world.

The global economy is projected to grow 5,9 percent in 2021 and 4,9 percent in 2022.
Finance and Economic Development Minister Professor Mthuli Ncube, forecast growth to top 7,8 percent this year, driven by a good agricultural season, massive construction projects across the country and high global commodity prices.

Growth is expected to remain strong in 2022.
The country gradually adjusted its lockdown this year in tandem with the evolving Covid-19 situation.
Overall, the pandemic saw reduced business trading hours, international and domestic inter-city travel bans, disruptions to local and global supply chains and astronomical increases in prices of a number of key products, among others.

But most Zimbabwe Stock Exchange (ZSE)-listed companies have reported strong results in their interim and year-end financials.

Market watchers say while Zimbabwe has been affected by the fallout from the coronavirus, it has fared relatively better than other parts of the world.

Zimbabwe National Chamber of Commerce (ZNCC) chief executive officer Mr Christopher Mugaga said despite the long shadow cast by the pandemic, businesses performed better than last year.

“The highs, obviously, are that businesses managed to access forex on the auction to support production, which saw an improvement in terms of locally produced goods,” said Mr Mugaga.

“Secondly, we experienced a significant shift in terms of export receipts, as businesses managed to access foreign markets.

“Thirdly, businesses managed somehow to have access to tenders for local infrastructure projects.
“We have also experienced volume growth across many companies, although sometimes it can reflect the impact of high inflation, but there was volume growth for most companies.”

The volatility of the local currency continued to be a major drag for the economy as the Zimbabwe dollar slid from about $83/US$1 in January to the current $105/US$1.
Margins on the parallel market are even wider.

“Operating costs continued to increase for companies because they had to go to the black market to look for foreign currency. Inflation has been a challenge, for sometimes it went down, but now inflation is on the up again.

“There is also the issue we always talk about, the issue of the intermediated money transfer tax, it was one of the albatrosses on business; it is a serious cost for business . . . ,” Mr Mugaga said.

Businesses reportedly managed to perform because they leveraged on technology, which enabled remote working, and continued to push volumes and grow revenues, notwithstanding the lockdown restrictions.
Confederation of Zimbabwe Retailers (CZR) president Mr Denford Mutashu said 2021 remained challenging for industry due to the coronavirus.

“Operating hours were reduced, costs piling against declining sales volumes. Landlords continued to demand full rentals both at commercial and domestic level. Real disposable incomes remained subdued, affecting aggregate demand,” said Mr Mutashu.

“Some non-essential businesses found the going tough as wages and salaries costs piled. We remain optimistic as the economy grows.

“Inflation was pinned down and foreign currency auction market came in
handy for our value chain players and the sector.”

The Government’s vaccination programme, he added, had ensured the economy opened up.
Economist Mr Eddie Cross said most companies experienced cashflow problems as the coronavirus pandemic constrained domestic economic activity.

“Managing a business that is stagnant or shrinking is very much different from managing a business that is expanding quite rapidly. I think many companies faced cashflow problems in 2021.

“Besides, the biggest challenge which remains unresolved is the issue of exchange rate management . . . ,” he said.

The challenge, Mr Cross indicated, was that the RBZ required bidders to submit local currency upfront but took time to disburse the forex.

“Such a scenario meant companies would not have both the local currency liquidity and the forex they required to import key raw materials, equipment or machinery, a situation that left many firms facing a liquidity crunch.”

Source: Sunday Mail