AMERICAN market research firm, Fitch Solutions has predicted that the unemployment rate will average 19,5% in 2023, owing to years of underemployment and deindustrialisation.
As of September, there were 3 913 966 employed from the working age population of 15 years and over, numbering 9 190 909, according to national statistics. From those employed, persons informally employed were 87,4% with an expanded unemployment rate of 47,4%.
The reasons behind these poor numbers are decades of deindustrialisation, a shrinking economy, volatile currency, inflation, heavy taxes on businesses, declining capital, forex shortages, paltry domestic and foreign investments, and policy missteps.
This was confirmed by Fitch in its recent consumer outlook of Zimbabwe.
“Averaging 19,5% over 2023, unemployment (as a percentage of the labour force) will remain a key challenge to the levels of income among Zimbabwean households. Over the medium term (2022-26), we forecast unemployment to continue to limit any improvement in the consumer outlook,” Fitch said.
“A combination of high underemployment, years of deindustrialisation and over two decades of high emigration of semi- and high-skilled workers out of the country limit the appeal for industrial companies. In addition, the country has a high disease burden similar to many in the southern Africa region, owing to the inadequate state of healthcare provision.”
It continued: “This is compounded by the prevalence of communicable diseases such as malaria and HIV/Aids, which can undermine productivity. As such, the structurally high unemployment rate will limit the potential of any consumer spending recovery in the short term.”
An elevated annual inflation rate categorised by triple-digit numbers has translated into higher costs for businesses and companies leaving little room for companies to hire.
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“I took this from the 2023 (National) Budget (see page 143). Young people and youth constitute 72,3% of the population. Sadly, our budget is not pro-youth. There are no tax credits for job creation and funds for startups. Rather, the budget places emphasis on higher taxes which is anti-jobs,” Africa Economic Development Strategies executive director Gift Mugano said on Twitter.
“Factor in several tens of thousands graduating from universities annually joining the job market which has a drought of jobs! In 2023 we need to seriously think about how we can capitalise on this youth bulge before it becomes a curse.”
Data from the Confederation of Zimbabwe Industries (CZI), the largest manufacturing business membership organisation in the country, reported that from 522 companies surveyed during the third quarter only 51% were able to create “some jobs”.
“Firms that increased employment added about 16% of their workforce during the period,” CZI said.
CZI said job creation was higher among companies that were less than 20 years in business.
These “some jobs” referred to by CZI tie in with revelations that from the total employed population in Zimbabwe, 70,6% were informally employed in non-agricultural sectors based on the third quarter national statistics.
From the companies surveyed by CZI, the erosion on revenue owing to inflation led to 35,4% of the firms registering a decrease in output while 22,1% remained the same.
Such decreases led to job losses.
“About 17% of the firms retrenched in the first nine months of the year,” CZI said.
The high inflation is owing to the continued loss in value of the Zimbabwe dollar that when reintroduced, back in June 2019, was nearly $6,50 against the greenback, declining to a current value of $658,73.
According to the Zimbabwe National Statistics Agency, last month saw the annual inflation rate reach 255%, down from 268,8% in October, and 280,4% in September. The drop is owing to more hawkish fiscal and monetary reforms.
“Inflationary pressures continue to build. Over the latter-half of 2022, inflation is beginning to shift into services such as tourism, and this will continue into 2023,” Fitch said.
“Rising consumer price inflation has been the key risk to consumer spending over 2022, and it has been eroding purchasing power and shifting consumer spending away from discretionary spending. This is the economic reality for consumers entering into 2023.”
Fitch expects an annual inflation rate to average 175% by the end of the year, before growing to average of 194% year-on-year (y-o-y) over 2023.
“However, over 2023, we see triple-digit inflation above 200% y-o-y persisting over H123.
“Inflation is forecasted to ease over H223, and as such, our Country Risk team forecasts inflation to end 2023 at 55,0% y-o-y,” it said.
“This severely elevated level will continue to pose major headwinds. Furthermore, with widespread poverty, rising fuel and food prices will force consumers to prioritise these essentials and in many cases, rely solely on subsistence farming for food supply.”
Mugano said the government should focus on economic transformation, creating an enabling business environment characterised by ease of doing business, and a stable macroeconomic environment.
He added there should be a corruption-free society, sound policies, constitutionalism, and respect of human rights and political tolerance.
“In whatever we do in 2023, we must bear in mind that we have a responsibility to create jobs and a future for the youth who constitute 72,3% of our total population. We have a responsibility to save our children from rampant drug abuse and other social ills,” Mugano said.
- This article was first published in the WeeklyDigest, an AMH digital publication
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