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Business Writer
Businesses in Zimbabwe suffered collapse in both domestic and export sales, as well as a declining capacity utilisation as a result of Covid-19, a survey by the Zimbabwe Chamber of Commerce (ZNCC) has revealed.
As a result, ZNCC suggests a Post Covid-19 Recovery Strategy, which can be formulated under the banner of the Tripartite Negotiating Forum before the end of the year.
The ZNCC survey, which was released as part of the business lobby group’s 2019 – 2020 Annual Report revealed that local firms had suffered a 58 percent decline in both domestic and export sales.
The ZNCC said the decline in both domestic and export revenue, seriously affects business viability negatively and is reflective of the decline in consumer spending.
Consumer spending is quite a huge component of GDP and that, combined with the decline in net exports, points to a considerable decline in GDP, according to ZNCC.
Challenges were experienced in accessing both local and imported raw material, which saw a decline of 55 percent and 57 percent respectively.
The biggest drops were, however, recorded in importing finished goods as well as accessing foreign direct investment with a decrease of 66 percent and 72 percent being recorded.
“On average, all the major performance-related indicators fell by more than half,” reads part of the Survey Report.
Out of the 96 businesses that reported on the conditions in local demand, only businesses from the agricultural and communication sectors are not experiencing reduced demand, according to the Survey Report.
As expected, sectors such as tourism, retail, manufacturing and construction, among others are experiencing a significant decline in local demand.
There have been reports of a liquidity squeeze in the market, which some analysts have attributed to the Reserve Bank of Zimbabwe’s monetary targeting framework which seeks to reduce the amount of money in circulation.
Reserve Money has been kept under a tight leash with the Government playing a key role with its deposits to the central bank growing each week.
The Government generates income from taxes, levies and fees, and growing deposits with the central bank signals a reduction in money supply to the private sector. ZNCC suggests that businesses need to find ways of reducing their reliance on imported inputs.
“They should explore the local market substitutes. The lockdown has therefore provided an opportunity for local businesses to develop domestic value chains and supply chains.”
If successful, this will result in a stable source of production inputs for businesses in addition to saving scarce foreign exchange, ZNCC believes.
In terms of exports, there was a marked decline although the manufacturing sector only derives 18 percent of revenue from the export markets.
According to the Survey Report, about 14 of the exporting businesses used to export an average of 39,6 percent of their output before lockdown and they are now exporting an average of 26 percent of their output.
“However, the general decline in export revenue is not surprising given the unfolding of a global economic crisis which is resulting in reduced demand for products imported from developing countries, and hence falling prices of these products exported by these countries including Zimbabwe,” reads part of the Survey Report.
ZNCC suggested a Post Covid-19 Recovery Strategy, which must include an increased working capital fund for industry, in addition to the $3 billion under the $18 billion stimulus package. A boost on the SME Support fund from the suggested $500 million is recommended. The business representative body suggested tax relief measures to address the cash flow challenges businesses are facing.
“For business, the Government should consider (tax relief measures such as) a reduction of the tax rate, offering tax holiday, offering tax credits and tax refunds, reducing VAT as well as removing the 2 percent tax.”
ZNCC said the removal of the 2 percent tax and the reduction of VAT will stimulate domestic demand.
Online Reporter