daniel chigunwe
Nelson Gahadza
Generally, an election year in Zimbabwe is considered a high-spending period by both the ruling party, opposition parties, and non-governmental organisations, raising fears of driving inflation. But for businesses, the spending drives volumes and profitability.
However, this year’s elections are somewhat different, as the economy has in recent months sustained a stable environment while businesses are not enjoying the anticipated election spending.
There were fears the period going into the election would result in unbudgeted election spending that could stimulate inflationary pressures if not managed properly.
Respect Gwenzi, manager and chief economist at Equity Axis, told Business Weekly that there was a serious exchange rate run three months before the elections, and that was fueled by an excess money supply.
He said the money was created through expenditures targeted at infrastructure, wage-related adjustments, and the procurement of forex from exporters.
“All these were avoidable excesses. While these are not direct election expenditures, we do not know what the forex purchased from exporters was used for.”
Business Weekly understands some of the foreign currency bought from exporters was used to pay debts the country owes Afreximbank while some of it was sold on the auction system.
Gwenzi said the real effects of the current measures will be seen over the next few months, and it is highly likely that policy will be loosened after elections because of accumulation, and the explosion may be of proportions not seen in the past.
Beverages giant Delta said in its recent financials that while a significant portion of sales is now going through informal channels, the company has not enjoyed the largely anticipated election spending.In a trading update, chief executive officer Matlhogonolo Valela said despite having elections this year, the company currently faces low consumer spending compared to previous election seasons.
“We have an election this year. We have seen fairly subdued political activity and limited spending, not in keeping with the elections in past years,” he said.
A snap survey of selected supermarkets in the central business district (CBD) of Harare confirmed low customer traffic.Analysts believe high inflation, low disposable incomes, and other economic hardships have forced muted spending for most Zimbabweans.
“We decided to forego our normal spending as we are not certain of what will transpire after the elections. It’s really been a difficult year for planning purposes, and even the sales I am getting are very low as people are not buying much. I am sure it is because of the upcoming elections, which have a lot of uncertainties,” said Mrs Tanaka Mapfumo, who operates a small retail outlet in the CBD.
In its recent monthly report, Old Mutual Investments said the number of court challenges associated with the nomination process has heightened political tensions ahead of the polls.It said there is a need for a collaborative effort between the political parties and government to build trust and promote a peaceful and credible electoral process.”
Generally, we anticipate a fragile political and business operating environment as we draw closer to election day,” it said.The Zimbabwe Electoral Commission (ZEC) reportedly submitted a $130 billion election budget, which is 71 percent above the $76 billion allocation presented in the 2023 national budget.”
Elections and monetary policy continue to dominate environmental themes, with both variables currently exhibiting fragile stability,” reads part of the Old Mutual Investments report.
OM Investments said the baseline view suggests an inherent resilience to avert an implosion in the near-term outlook.
“Overall, downside risks around elections and monetary policy pose a muted, yet real, threat to macroeconomic stability over the foreseeable outlook,” reads the report.
Bongani Ndlovu