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Lockdowns, not sustainable in the long run



ZIMBABWE’S economic growth will slow down this year due to Covid-19 lockdown restrictions imposed by the government in its bid to control the spread of the deadly pandemic, economic analysts say.  

Finance minister Mthuli Ncube projected economic growth of 7.4% this year, but economic analysts this week said the growth was unlikely to be achieved due to lockdown restrictions.

The government recently imposed the second national lockdown following a surge in Covid-19 cases, with only essential services, such as hospitals, pharmacies and supermarkets, remaining operational for the next 30 days.

The essential services are allowed to operate for only seven hours a day.

The government first imposed a nationwide lockdown in March last year to contain the spread of Covid-19, but had eased most of those measures amid fears of further economic malaise.

Covid-19 aside, the Zimbabwean economy was already hamstrung by a plethora of problems among them currency volatility, foreign currency shortage, policy inconsistency, low credit and obsolete industrial equipment, among other challenges.

Covid-19 cases doubled in two months from 8 374 at the start of November, to 22 297 as at 11 January 2021.

Veteran economist John Robertson said if the lockdown restrictions remain in place for some months, the economy was likely to slow down and one of the more serious impacts will be on earnings in both the formal and informal sectors.

“Lower earnings will cause reduced consumption and smaller turnover volumes for retail companies. The volumes carried by road transport could be affected and congestion at border posts could mean delays in receiving as well as sending traded goods,” Robertson said.

“Any hopes that tourism might improve are unlikely to be realised, so foreign earnings could be affected. Economic growth might be prevented altogether if the restrictions remain in place for more than a few months. Zimbabwe could experience a GDP decline of 2% if the country cannot get back to work by about April.”

Economist Prosper Chitambara of the Labour and Economic Development Institute of Zimbabwe said: “It’s (lockdown) going to slow economic growth for this year. Already, the World Bank is projecting (a growth of) 2,9% but my own projection is that this year the economy I think will recover slightly, probably by between 1% and 2%.

“The recovery is going to be very much subdued and much lower rather than the official projections from the government,” he said.

Zimbabwe’s economy is highly informal but the lockdown has halted all informal economic activities a move likely to increase poverty levels which, in turn, could result in an increase in social ills like crime.

If the lockdown is extended, Ncube may be forced to allocate additional funds to the social sector rather than the productive sector.

According to Ncube, Zimbabwe’s economic growth this year is expected to be driven by consumption, which is expected to contribute 2.6% and investment at 5.8%.

The recovery in consumption is mainly anchored on expected stabilisation of inflation through ongoing policy interventions which should aid restoration of purchasing power of consumers.

Public investment is also expected to contribute 5.1% to GDP growth.

From the production side, all sectors of the economy are expected to register positive growth in 2021, with the agriculture and mining sectors expected to record the highest growth rates of about 11% each, and tourism (6.8%) and electricity (10%) among the major sectors.

Confederation of Zimbabwe Industries (CZI) vice-president Joseph Gunda said industry was likely to be further crippled if South Africa, the country’s largest trading partner, closes its borders.

“Right now it’s actually very difficult to tell because the cases are going up and the tendency is that we don’t know where it’s hitting. It could be hitting industry or our workers. We are yet to assess the impact but wherever it’s hitting it’s affecting the economy,” Gunda said.

“The importation of raw material from South Africa, if South Africa locks down again like they are trying to tighten, it could also affect us. We may have the foreign currency from the auction floors reserved for the raw materials but, if the raw materials don’t move from South Africa because of the lockdown, it affects us.

“We are approaching it as it comes but we don’t have full information at the moment of the impact because we are still assessing.”

South African President Cyril Ramaphosa on 11 January announced the extension of adjusted level 3 lockdown, closing land borders until 15 February to reduce overcrowding and curb the spread of Covid-19. These include the six busiest border posts, which are Beitbridge, Lebombo, Maseru Bridge, Oshoek, Ficksburg and Kopfontein.

As a solution going forward, economists said, the government has a few options as the conditions set by neighbouring countries were beyond Zimbabwe’s control.

“Border restrictions might include compulsory vaccinations, and these might take some months to reach Zimbabwean travellers and vehicle drivers. Government should accelerate its planning to generate better investment conditions so that self-sufficiency takes over from dependence on imports for all food products, clothing and footwear,” Robertson said.

He said cheap imports, especially second-hand clothing, were preventing the recovery of local factories. These imports should be banned to help create more local jobs, he said.

Chitambara said there was a need for the country to put resources in the health sector.

“Now we are talking of a vaccine, I think we also need to start financing some vaccines for the front-liners immediately before winter. I think we need to move with speed and be very robust. It really requires resources to be able to finance that kind of investment, rolling out vaccination and also even increasing social protection financing because a lot of people are affected, loss of income and jobs. Our ultimate goal is about how you finance your response and also the political will and commitment,” he said.  

A Bulawayo-based economist said the government should provide incentives for the informal sector to formalise as that would limit the impact of the lockdown-based Covid-19 management strategy on the economy.

“On the other hand, the current lockdown is also a blessing in disguise to the manufacturing sector as most of their products will enter the market with limited competition due to the closures of the borders. Consumers will be forced to buy local goods,” the economist said.

In a bid to assist all productive sectors of the economy by ensuring they revive operations and maintain jobs following the outbreak of the Covid-19 pandemic, President Emmerson Mnangagwa on 1 May 2020 announced an ZW$18 billion stimulus package.

However, in its paper that spells out companies’ expectations for the 2021 national budget, the CZI said companies indicated that no funds were accessed under the rescue package.

Lockdown imposition came at a time the country is battling high inflation rate, power outages, among other bottlenecks.

Zimbabwe’s year-on-year inflation rate dropped to 401.66% in November, from 471% the previous month, according to data released by the Zimbabwe National Statistics Agency (ZimStat) last month.
This means prices, as measured by the all-items consumer price index (CPI), increased by an average of 401.66% between November last year and November 2020.

On the other hand, the cost of living for a family of six increased by 5.66% to ZW$22 976 in November, underpinned by a rampaging parallel market exchange rate, according to the Consumer Council of Zimbabwe. The ZW$22 976 is way above average incomes in Zimbabwe, where the least-paid civil servant earns about ZW$14 000 per month.