South Africa unrest ravages Zimbabwe economy

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Zimbabwe’s fragile economy has been hit by the deadly unrest in neighbouring South Africa amid revelations the country could experience severe shortages owing to supply disruptions, Business Times can report.

It is understood that most of Zimbabwe’s goods coming from Durban ports and various containers were looted and burnt. Zimbabwe spends close to US$2bn on South African imports yearly and exports US$2.3bn.

Various trucks from KwaZulu-Natal were torched during protests, leading to the closure of the N3, the highway linking sub-Saharan Africa’s biggest port in Durban to the economic hub of Johannesburg.

The mayhem in South Africa was triggered by the jailing of former president Jacob Zuma.

South Africa has remained Zimbabwe’s largest trading partner accounting for close to half of its total imports and exporting 65% of its total exports to the neighbouring country.

But, the unrest has forced businesses to close their doors for fear of looting and companies are now unsure when to reopen.

Apparently, projected losses due to supply chain interruption in South Africa could be close to US$32m.

Multiple analysts said there is a high likelihood that Zimbabwe will experience severe shortages of critical raw materials. Local companies are battling to access critical raw materials from South Africa as some containers were burnt and looted.

Industrialist Sifelani Jabangwe told Business Times that the situation was dire as Zimbabwe relies on South Africa.Jabangwe said local companies should develop other sources of raw materials outside South Africa for them to survive the negative impact of South Africa’s troubles.

“If South Africa sneezes, we will certainly catch the cold as the Southern African nation is our biggest trading partner, anything that happens will certainly have an effect on us,” Jabangwe said.

“The direct impact that the protests have is that we will certainly experience some shortages in the coming few weeks as we are leaving with hand to mouth as industry in terms of supplies hence with violence going on at the ports our supplies will be delayed further.”

He said the situation was a double trouble for Zimbabwe, which is already buckling under other troubles such as foreign currency shortages, foreign payments backlogs and Covid-19 pandemic which is causing some delays in procuring raw materials.

“The major problem is that the banks are not giving significant amounts to import for two months or so hence there is constant need of importing almost every two weeks,” the industrialist said.

“We don’t have working capital for the industry hence our crisis has escalated more than those who are directly affected as we depend on weekly imports. We can say that our stock is basically in South Africa. We have an umbilical cord relationship with South Africa and we struggle to survive without them.”

The protests, which have rattled the economy, have turned violent, causing havoc in various parts of Kwazulu-Natal, which is the home province of Zuma and in Gauteng, South Africa’s economic hub.

In the past two days, the riots, which have put economic activity on hold, have escalated in South Africa, forcing President Cyril Ramaphosa to deploy soldiers to quell violence.

Zuma, who was convicted of contempt of court after failing to attend an inquiry into   corruption during his presidency, was handed a 15-month prison sentence.

The widespread riots are damaging business confidence and have disrupted the country’s key trade routes.

Zimbabwe National Chamber of Commerce CEO Christopher Mugaga said the trade loss will never be recovered as the local companies are still waiting for the supplies from South Africa.

“The trade between the two countries has been heavily interrupted and the movement of goods to inland Zimbabwe will be disrupted hence companies’ operations will be affected and this may result in some shortages,” Mugaga said.

“As a result the country will lose over US$32m this week with impact expected to be felt over the next few weeks as it takes time to recover destroyed or looted goods.”

Given the impact of riots in South Africa, forex shortages and Covid-19 effects, Mugaga said more companies are likely to shed jobs.

These are likely to affect the capacity utilisation of local companies.

The diaspora remittances will also be affected in a way as many companies would close shop and drive many Zimbabweans in South Africa into extreme poverty and will not have capacity to send money back home.

According to South African authorities, over 200 shopping malls had been looted by mid-Monday afternoon and retailers had lost an estimated R2bn.

Economist Gift Mugano said the violence disrupts trade facilitation.

“Durban port is one of our gateways to International trade and this violence can disrupt trade facilitation. Already there is anxiety on the Zimbabwean perspective on what could happen to trade,” Mugano said.

“The same applies to imports because Zimbabwe imports through the Durban port as well; it means there could be a massive disruption on imports supply.”

He added: “We have some companies which are headquartered in South Africa and these get their supplies from parent companies and these disruptions might also affect supply of commodities in Zimbabwe which can also cause shortages.

When disruptions of this nature happen there could be serious capital flight where investors will move their money to Shanghai or New York to markets which are stable.”

Mugano said that there will be a run on the Rand which will result in capital drought   in South Africa.

He said Zimbabwean companies were having lines of credit   from South Africa which could be in the form of commodity backup because they have liquidity. Therefore, the funding will likely reduce as those regional companies will be facing challenges.