BY MTHANDAZO NYONI/FIDELITY MHLANGA
THE year 2020 has kicked off on a low note as the business sector and consumers continue to suffocate under a harsh economic environment, prompting them to call for urgent solutions, especially political dialogue.
Zimbabwe is reeling under economic hardships characterised by hyperinflation, low salaries, excessive power cuts, dire shortage of maize meal and low production of virtually everything among a plethora of other economic problems that have pushed citizens and businesses to the edge.
The southern African nation features among the worst economic performers, coming only second to Venezuela whose economy is envisaged to contract by 20,5%. Its gross domestic product (GDP) growth is expected to contract -12,9%, according to the Economist Intelligence latest report.
Industry players and consumers who spoke to Standardbusiness last week said the situation was now unsustainable, with businesses suffering a weakened domestic market base, and consumers enduring high prices.
“The economy is facing stagnation characterised by negative growth, high rate of inflation, high levels of unemployment or under-employment, chronic forex shortages and power shortages,” Zimbabwe National Chamber of Commerce (ZNCC) Matabeleland chapter chairperson Brighton Ncube, said.
Figures from the Zimbabwe National Statistics Agency (ZimStat) indicate that year-on-year inflation accelerated to 481,05% in November last year from 440,18% in the previous month, a new post-dollarisation high.
Ncube said the fall in domestic demand had affected businesses in a number of ways as most of the businesses derive their working capital from short and long-term financing.
“The drop in revenues means businesses are unable to repay loans and financiers are forced to foreclose on overdue debts. The recurrent expenditure is not met adequately and as a result businesses are failing to pay salaries and for utility services. Reduced demand also means suspension of further investments in business operations such as re-tooling. It means the financing for innovation is constrained,” he said.
He said the signs of an impending drought this season were further dampening the little prospects of a bright 2020 outlook.
“Our economy is mostly agro-driven and a drought strikes right at the core of any hopes for economic growth. We are optimistic though, going by what the bureaucrats are saying, that the rewards for the austerity measures implemented last year will begin to show this year,” he said.
CEO Africa Roundtable director Kipson Gundani said as more and more individuals and entities charged hard currency for their goods and services, chances were high that the economy would redollarise in 2020.
“Well, it’s a tricky question, but nothing much has changed from the close of the year in 2019. Energy issues, currency issues, inflationary pressures are persisting. The environment has not changed, meaning to say it’s Aluta continua. I believe that like every society, you can’t continue to sink because once you do that you reach rock-bottom. There is a significant brewing for market forces to self-correct. For instance, everyone is openly selling goods in US$ or the rand. We are likely to see a continuous fight between the market forces and populist forces and market forces will win,” said Gundani.
“In 2020 we are likely to see the market self-correcting. A second redollarising is brewing. It will bring a borrowed stability like what we experienced in 2009 -2013.The greatest blow is the imminent drought. It’s going to hit us hard and affect the bigger chunk of the economy. This will test our level of disaster preparedness. Gone are the days of relying on rain-fed water.”
In its economic commentary, FBC Securities last week said challenges that rocked the economy that included high inflation, escalation in electricity load shedding, reduced aggregate demand across all sectors and distortions in local pricing of goods and services would comtinue in 2020.
“The challenges in the economic environment are expected to persist in the short to medium term as inflation and foreign currency volatility will constrain operations. The cumulative impact of the macroeconomic and political developments has reflected in a reduction in volumes for both local and exports markets.
This environment creates various challenges which at the same time also bring opportunities to the business community. Intensifying investments in sales and marketing initiatives to promote foreign demand is fundamental as the domestic market remains subdued,” FBC Securities said
Confederation of Zimbabwe Industries president Henry Ruzvidzo said the current economic environment was challenging for business on a number of fronts.
These include policy changes, infrastructure challenges, a financial sector unable to support enterprise, a weakened domestic market base, low foreign direct investment and a high demand for forex relative.
“The very real prospect of a drought will require that the country’s best minds apply themselves to mitigate the social and business impact. The projection for 2020 will hinge on further policy measures particularly on the monetary front and on energy supply,” he said.
“It is possible to have a policy mix that encourages growth as already signalled in the 2020 National Budget. Production for both the local and export markets is key to turning around the economy. Policies must be evaluated on whether they increase or decrease national production.”
“Whilst the prospects for the year ahead appear quite daunting, a single-minded drive towards the national vision complemented by appropriate policies should be sufficient to have the desired outcome,” he said.
Association for Business in Zimbabwe CEO Victor Nyoni said the loss of consumer purchasing power was a “serious challenge that we would want to see improving in 2020. Failure to do that, businesses are in trouble.”
“Some businesses are openly trading in foreign currency and nothing is being done to them. This points to policy inconsistency that we always talk about. There is need for commitment from all players, and government should create policies that suit the interests of businesses,” he said.
Consumer Council of Zimbabwe Matabeleland regional manager Comfort Muchekeza said save for salaries, everything else had gone up.
“Consumers are finding it extremely difficult to make ends meet. They are in a difficult position. There is need for all parties to come together and have an honest discussion over these issues,” he said.
National Consumer Rights Association coordinator Effie Ncube said all indicators were pointing towards the wrong direction and Zimbabweans should brace themselves for a fight or for extreme and unmitigated hardships.
“It is auto-pilot into poverty and hunger. The economy is expected to contract by at least 15% or worse. Disposable incomes will collapse even further. The cost of living will skyrocket. Unemployment will rise even further,” he said.
“Business and consumer confidence will decline even more. The Zimbabwean dollar will tumble to catastrophic levels. The little left of the manufacturing industry will disappear. Balance of payments will go deeper into the negative. Protected corruption will worsen.”
To avert a national catastrophe, Dube said there was need for an all-stakeholders dialogue wider than parties under the Political Actors Dialogue and as inclusive as all shades of opinion out there should be urgently convened.
President Emmerson Mnangagwa has been holding talks, without MDC, with leaders of fringe political parties that took part in last year’s elections to try to resolve the country’s political and socio-economic crisis, which continues to worsen.
“Government must also find a way to instil business and consumer confidence in the worthless Zimbabwean dollar or ditch it for the rand, US dollar or a multi-currency setting. The status quo is unacceptable. Otherwise there is going to be massive civil instability,” Dube said.
He said government needed to continue improving the environment for the ease of doing business, adding the policy interventions should encourage growth and attract foreign direct investment.
“At present business feels there is over-regulation and it is stifling growth. Confidence must be instilled in the use of the local currency. There is need for business and general stakeholders to seriously start diverting to renewable sources of power as a means of long-term planning for the continued sustainable energy sources.”
ZNCC Matabeleland chapter chairperson Brighton Ncube said energy was a key enabler to an economy especially in agriculture, manufacturing and mining which underpin the economic growth and well-being.
“Corruption should be dealt with decisively as it is weighing down heavily on all the other efforts to turn the economy around,” he said.