Zimbabwe’s fragile and mostly informal economy has been severely impacted by the Covid-19 pandemic as economic activity has been at a standstill for more than a month since lockdown.
The Confederation of Zimbabwe Industries (CZI) indicated that the average capacity utilization before lockdown was 61.2% and is expected to have dropped to only 28.9% during lockdown. In the first 21 days of the lockdown, CZI reported an 88% industry shut down with the remaining 12% operating for reduced hours.
To date, the informal sector remains closed despite the relaxations on the rest of the sectors after the expiry of the second 14-day lockdown period. Government is still trying to come up with effective means to make sure the informal sector, which is undoubtedly now the biggest employer, can contribute to the fiscus through paying taxes.
Recently, the Southern African People’s Solidarity Network called on respective governments to also prioritise the informal sector players in their recovery plans and retooling. CZI carried out surveys to capture the multi-dimensional impact of COVID-19 and the lockdown on business and on the economy.
Some of the effects of the lockdown which businesses in Zimbabwe are facing include; contraction of economic activity, decrease in capacity utilisation, cash flow or working capital challenges and a general increase in the cost of doing business.
“The company agrees with the conclusions of CZI that the lockdown will have a significant negative impact on the economy, exacerbating an already difficult operating environment,” Cassava Smartech Zimbabwe stated in its special Covid-19 trading update. The company says it continues to leverage on the use of digital technology and online business models to offer services and remote access to products and services during the lockdown period.
Being digital, the business, can and does operate independently of people’s physical location or movement and this resulted in continued availability of all our services during the lockdown albeit at a reduced level. However, the lockdown severely affected its business partners across all industry sectors with the majority of industry having shut down during the initial lockdown period.
The remaining businesses which were classified as essential services operated for reduced hours in compliance with the lockdown regulations. This had an impact on the business which is largely reliant on its partners. “To the extent that the partners were closed, our volumes and values were affected accordingly resulting in volumes decreasing by an average of 40% across the group during the lockdown period, subsequently recovering as the lockdown rules eased,” it said.
Cassava Smartech Zimbabwe has introduced various cost cutting initiatives in order to reduce the effect on profitability margins. Also, the company said it will continue to monitor its supply chain in light of the impact of the pandemic and formulate contingency sourcing plans accordingly.