BY TATIRA ZWINOIRA
“We are not shrinking,” said Finance minister Mthuli Ncube, while giving an economic update at a press conference last Monday.
The minister said that while countries such as the United States, United Kingdom and South Africa were taking on more debt and companies were closing due to Covid-19, the same problems were not happening in Zimbabwe.
In fact, Ncube said he was “more bullish” about economic recovery now, compared to how he felt in the second quarter.
In that regard, it’s important that as Treasury is currently preparing the 2021 national budget, which is expected next month, to fact-check Ncube.
“Coming to the question that other countries are shrinking and that we are taking on more debt, no, we are not shrinking. I am not supposed to mention other countries. But I am going to. South Africa, US and UK, just those three, companies are shutting down because of Covid, but not in Zimbabwe,” said Ncube.
“Since we said companies can be opened, they are not shutting down. I am seeing that volumes are up, being maintained, or recovering. I am not seeing a similar pattern in companies shutting down. That is why our prognosis is that the impact of Covid, overall, on Zimbabwe is not as deep as in other countries.”
In a leaked letter to international financial institutions (IFIs) dated April 2, 2020, Ncube said the economy was expected to shrink by as much as 20% this year, owing to “domestic demand significantly depressed”.
However, as stated by Ncube last Monday, he is more bullish about economic recovery. Yet companies are reporting reduced consumer demand. One such company, Innscor Africa Limited, said in its half-year report: “Restrictive measures (Covid-19 measures) employed by the authorities resulted in severe operational disruptions and curtailed consumer demand in numerous categories.”
The Consumer Council of Zimbabwe, Confederation of Zimbabwe Industries (CZI), National Consumer Rights Association, Zimbabwe National Chamber of Commerce, Zimbabwe Congress of Trade Unions, Confederation of Zimbabwe Retailers and Employers’ Confederation of Zimbabwe have also reported lower consumer spending.
United Nations-related bodies like FEWS NET and non-governmental organisations have also pointed to lower or constrained consumer spending due to a volatile Zimbabwe dollar, wage erosion and runaway inflation.
The World Bank says Zimbabwe will contract by 10%, the International Monetary Fund says it will slide by -7,4% and the African Development Bank placed the figure at -8,5%) by year end.
Companies in Zimbabwe were already closing owing to a volatile currency, foreign currency shortages and hyperinflation before authorities implemented Covid-19 lockdown measures in March.
In February, the CZI projected that industry’s capacity utilisation would fall this year if government does not change its policy direction.
The CZI said at 27% capacity utilisation, “some companies would have closed”.
Thus, with Covid-19 restrictions companies were not able to sell their goods, resulting in closures.
In Zimbabwe Revenue Authority’s second quarter report, released in May, vice-chairman Josephine Matambo confirmed that businesses were closing largely due to Covid-19 restrictions.
“The key challenges faced by the authority in the second quarter are largely related to the Covid- 19 pandemic that will result in closure of some businesses, reduced profitability, employee layoffs, reduced trade and locked tourism,” she said.
During Monday’s press conference, Ncube touted that one of the highlights of the Transitional Stabilisation Programme was budget surpluses.
However, as reported by our sister paper, the Zimbabwe Independent on Friday, government incurred a debt of US$2,23 billion between July 2019 and July 2020 based off Reserve Bank of Zimbabwe statistics. Of this amount, 80% represented blocked funds from the private sector, 10% represented debt for services rendered to the government during the period and the remaining 10% represented interest on existing debt owed to international financial institutions.