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Business Writer
Secondary Income, the bulk of which were remittances, helped Zimbabwe record a current account surplus for the first time in years according to the 2019 Annual Budget and Economic Review Report released by Treasury last Friday.
According to Treasury, the country’s current account position significantly improved in 2019 from persistent deficits to register a surplus of US$920,4 million from a deficit of US$1,4 billion in 2018.
The positive outturn was driven by the secondary income component, which registered US$1,4 billion, of which 66 percent were remittances.
This puts official remittances for the year at approximately US$924 million.
The World Bank estimates that Zimbabwe has been receiving at average US$1,8 billion per year in remittances for the past 10 years.
In 2019, World Bank’s estimates put Zimbabwe’s remittances at US$1,773 billion, which is a very significant figure given exports brought in US$4,663 billion in the same year.
Remittances are an underappreciated driver of the world economy as they are the main source of income for tens of millions of households and also make up a large proportion of the national income.
In Zimbabwe, apart from helping households get by, remittances are also a significant source of foreign currency for importers and foreign travellers.
Remittances have also provided an illegal but lucrative source of income for street money changers.
Globally, remittance flows attained a milestone last year, overtaking the flow of foreign direct investment to developing countries for the first time: There was $554 billion in international remittances, against $540 billion in FDI.
Remittances are, however, expected to subside this year following the outbreak of the coronavirus pandemic that has been devastating for foreign workers across the globe.
In 2020 remittances are expected to decline by 20 percent, or about $109 billion, to $445 billion, according to the World Bank.
The global lender’s studies show that the economic impact of the pandemic has cost migrant workers their jobs, just as travel restrictions have made it hard to go back home.
Marooned migrants have not been able to send money — remittances — overseas to their families, many of whom are reeling from greater economic hardship and need the money more than ever.
Few foreign workers use online banking to remit money. As if that wasn’t bad enough, the prospect of a long global economic slowdown means it may be years before migrants who lost their jobs can find employment again, at home or abroad.
Also worrying are calls to employ locals in countries like South Africa, a significant source of remittances for Zimbabwe.
South African Finance Minister Tito Mboweni said post-lockdown “the proportion of South Africans working in a restaurant must be greater than that of non-South Africans.”
Employment and Labour minister, Thulas Nxesi, also shared the same sentiment and said that his department will clamp down on employers not complying with the country’s labour laws by unlawfully hiring foreign workers.
“We cannot in this day-and-age continue with the employment of foreign nationals, and think there will be peace if you are going to take low-level jobs of low-skilled people and give it to displaced people. These are not scarce skills jobs. These are jobs that local people can be able to do. Inspectors must deal harshly with employers not complying” Nxesi said in September 2019.
The South African Department of Small Business Development also said it is working on a new law that will restrict foreigners from working in certain sections of the economy.
If there is a follow through on this, it can cause serious difficulties for Zimbabwe households state finances.
Bongani Ndlovu