Zimbabwe: COVID-19 Takes Toll On Businesses

30 March 2020

Most of Zimbabwe's business sectors are buckling under the weight of the Covid-19 pandemic. Production is expected to take a significant dip across industries due to disruptions on global supply chains for products and raw materials, as nations lock-down to contain the disease.

Industry players have since called for mitigatory measures including suspension of certain taxes and import duties on goods to facilitate efficient importation and setting up a fund to boost local production of essentials and bail out firms affected by Covid-19.

In a position paper to Government, Chamber of Mines of Zimbabwe (CoMZ) said mineral production could plunge 60 percent in the first quarter of this year while $400 millio'n in revenue could be lost as the pandemic forces firms to scale down production due to supply chain and logistical disruptions.

Economic analysts said while the resilience of supply chains has previously been tested, the negative impact of Covid-19 has caused disruption in ways never seen due to people not being able to work.

The combined effect of reduced access to markets for commodities and inputs have resulted in loss of revenue with most companies now struggling to meet fixed costs including payroll obligations.

According to Hospitality Association of Zimbabwe (HAZ), tourism operators have seen 80 percent fall in bookings and anticipate cancellations to reach 90 percent for the year, prompting some operators to consider cutting their head-counts.

"We surely don't know what will happen because if the airlines halt their operations and also with the closing of borders all around us, we will end up with no guests and that's a big blow," HAZ president, Victoria Falls chapter Arnold Musonza was quoted by media as saying.

The Chamber of Mines of Zimbabwe (CoMZ) said the mining industry has lost over US$200 million in the first 30 days of lock downs across the world, as countries battle to contain the pandemic, with gold and platinum losing about US$160 million.

As South Africa, Zimbabwe's largest trading partner in a 21-day lock-down from March 26, the domestic mining industry is expected to experience more adverse economic shocks.

"Most mining companies are facing reduced productivity and production due to the scale down of operations on the back of lock-down in transit and buyer countries.

"This situation has been exacerbated by difficulties in securing inputs for production and replacement capital due to widespread lock-down in source markets," CoMZ said.

The Confederation of Zimbabwe Industries (CZI) said last week Zimbabwe will experience major dislocations in exports and imports as Covid-19 spreads and countries adopt restrictive counter measures.

"A mini survey on the impact of the pandemic on local industry has shown that 46 percent of local firms have already suffered disruptions in supply chains," CZI said.

The World Health Organisation (WHO) declared the novel coronavirus, which causes COVID-19, as a Public Health Emergency.

Zimbabwe National Chamber of Commerce (ZNCC) chief executive Takunda Mugaga, said Covid-19 had paralysed international trade and increased the burden costs such as salaries, rentals and storage.

"Most of our members export to countries like South Africa, China, Namibia and all, but you see that most of their products are incurring additional costs of warehousing or keeping their products safe.

"Cost of producing in Zimbabwe is high and if your products caught up without being exported; you are losing already.

"This is also happening on imports, members are trying to import but you realise most ports of entry, even in South Africa, have been closed and so the (imported) goods are stuck," he said.

Mr Mugaga said many companies had suffered from bulging costs against falling profits.

He said firms were incurring costs paying unproductive workers because the majority of them do not have digital systems that allow employees to work from home.

These sentiments were corroborated by Confederation of Zimbabwe Retailers (CZR) president Denford Mutashu, who said Covid-19 had restricted movement of imported products across borders, resulting in some local traders running out of stock.

"It certainly means that the sector will also be hard hit given the fact that manufacturers right now are struggling to access raw materials so that they can supply products on the market," he said.

Mr Mutashu said the 21-day lockdown in South Africa, which started on Thursday last week, will have serious negative implications on Zimbabwe in terms of access to raw materials and other finished goods.

CoMZ said ferrochrome producers had been hit hardest by the Covid-19 after prices slumped to shut-down levels, after plummeting more than in 2015. Most ferrochrome smelters have been put under care and maintenance, with Zimasco having started since March 25, 2020. Potnex has already closed while Afrochine is operating below 50 percent.

CoMZ said the platinum and nickel industries have not been spared the logistical complications arising from the lock-down in South Africa and other markets.

Among suggested mitigatory measures, mining companies pleaded with Government to waiver payroll tax saying the reduction in revenue has made it difficult to meet payroll costs and other inevitable obligations.

Amid reduced export revenue, CoMZ has appealed to Government to allow mining companies to pay taxes, electricity and utilities in local currency to enable miners to use the available forex to sustain operations.

The chamber is also appealing for a royalty holiday for the second quarter of 2020 in light of reduced revenues for mining companies.

Mines have appealed for an incentive on their mandatory foreign currency surrender portion, as with gold, set at a threshold of least 40 percent of gross proceeds to match high local costs.

Further miners want Government to reduce the electricity tariff for ferrochrome producers in light of the depressed prices and need to remain in business.

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