Zimbabwe: Zim Businesses Risk Closure As Gvt Remains Mum On Bailout Support

Health Minister Obadiah Moyo adjusts President Emmerson Mnangagwa's face mask at State House.
31 March 2020

Hard pressed local businesses are set for a rough landing when the effect of the covid-19 lockdown takes its toll due to government's failure to provide a bailout plan to cushion their fragile operations, 263Chat Business has established.

Businesses will definitely need some stimulae to regain lost ground during the 21-day lockdown, moreso the small to medium enterprises with leaner balance sheets are likely to be the hardest hit.

With an economy already hanging on loose thread, a flexible bailout plan will be critical in months ahead, analysts say.

Other governments within the region have already announced plans to bailout small to medium establishments which are a vital cog of their economies.

For instance, South Africa's department of Small Business Development has put in place three facilities to rescue small to medium businesses affected by covid-19 pandemic which are the Business Growth and Resilience Facility, SMME Relief Finance Scheme and Sefa-Debt Restructuring Facility.

This is in addition to the R 1 billion each from the Ruppert and Oppenheimer families who pledged support of these businesses.

"The absence of a bailout will have disastrous consequences on Tourism & Hospitality and Transport sectors mainly. Already 80-90% reservations & bookings have been cancelled while room occupancy has fallen below 20%," economic analyst, Victor Bhoroma said.

"Cresta, Africa Albida & other small operators have already suspended operations. Retrenchments & termination of service contracts will increase poverty levels especially for tourism biased towns such as Kariba & Vic Falls. Companies will go into financial stress if there are no tax breaks or rescue packages," he added.

The United Nations yesterday warned that half of all jobs in Africa could be lost when the coronavirus crisis is over as it took note of the inadequate levers to sustain businesses post this health crisis.

Yet for Zimbabwe, with far deeper rooted economic problems, the effects could be much worse.

Already most businesses in the country are still recovering from exchange losses incurred last year following the monetary policy changes that devalued their balance sheets.

This could be worsened by global events of markets and investors reeling from the scourge of the Coronavirus.

The International Monetary Fund (IMF) has projected the 2020 global economic output to be the lowest since the 2008-2009 financial crisis, below 2.9% (Down 0.4% from the initial forecast of 3.3%).

Global stocks continue plummeting despite the announcements of various rescue packages worth trillions of US Dollars by IMF, The World Bank, United States, The European Union (EU), United Kingdom (UK), Japan and others.

But Zimbabwe' s government coffers are empty yet there is a huge task at hand to fight the virus.

Market watchers suggest that in the case of shortages of resources, the government must formulate interventions that lessen the burden on companies instead.

"Being cash strapped the best government can do is to exempt business from taxes that restructure them because these 3 weeks represent lost production," economic expert, Pepukai Chivore weighed in.

However, at a regional level the Egyptian based African Export Import Bank (Afreximbank) has announced a $3bn credit facility for African countries to help mitigate effects of coronavirus.

The Pandemic Trade Impact Mitigation Facility willl help support foreign exchange reserves and assist commodity exporters with declining revenues, the bank said in a statement.

Nevertheless, government has made effort to cushion citizens with various safety nets including the electronic transaction cashouts to the vulnerable.

But with the end to this health crisis not yet in sight, uncertainty grips local businesses as it remains unknown how much more they will suffer.

Without government relief support, the survival of most Zimbabwean busineses is racing against time.

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