25% of Formal Jobs And 75% Of Informal Will Be Wiped Out By The Coronavirus Lockdown.
17 April 2020
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ZIMBABWE should brace for massive economic dislocation as business leaders project that 25% of formal and 75% of informal jobs in the country will be lost as a result of Covid-19 amid calls by industrialists to ease the lockdown measures to avert the total collapse of an already fragile economy.

The public health emergency has paralysed the global economy and prompted the government to implement a 21-day national lockdown which began on March 30.

President Emmerson Mnangagwa said cabinet would convene next week to decide whether to extend the lockdown or not. Zimbabwe had 23 confirmed cases of Covid-19 infection, with three deaths.

In a report titled Sustainable and Flexible Economic Interventions to Address Covid-19, the Zimbabwe National Chamber of Commerce (ZNCC), which draws its membership from business entities, said a quarter of the country’s formal and three quarters of informal jobs could be wiped out as a result of the impact of Covid-19.

“Workforce will be made redundant as some businesses will not be able to adapt to the effects of Covid-19,” the ZNCC wrote in its report.

“There is going to be loss of employment, 25% of formal jobs will be lost and 75% of casual/temporary jobs will be lost as businesses lay off workers given the sharp contractions in many sectors.”

The ZNCC warned that tourism will be the hardest hit sector, with nearly 25% of its workers being made redundant while the manufacturing sector is expected to record a significant number of layoffs.

“If the total lockdown is extended without resorting to partial lockdown, some of the leisure and tourism operators might completely collapse,” the ZNCC warned.

It projected that the economy will contract by 9% this year. It also foresees a budget deficit equivalent to 5% of gross domestic product, coupled with increased government spending as a result of the pandemic. The report reveals merchandise exports could plunge to US$3,5 billion in 2020 from US$4,5 billion in 2019.

Disruptions are expected in the supply chain and labour, while uncertainty, contractions across key sectors and a mispriced exchange rate will feed into the turmoil, the ZNCC said.

The business body recommended a partial lockdown which will entail continued monitoring and restricted working hours from 5am to 7pm. It also suggested that movement be allowed only within cities while inter-city travel remain barred. he production of goods by business to meet domestic needs and retention of the workforce.

It also recommended exemption from Pay As You Earn for the month of April and temporary freezing of employment taxes and levies, among other measures.

Former Confederation of Zimbabwe Industries (CZI) president and United Refineries chief executive Busisa Moyo warned this week that industry could grind to a halt if the government continues with the lockdown, given that 82% of companies are likely to fail to pay salaries beyond a month.

Moyo told the Independent that local companies will require a stimulus package to remain operational after capacity utilisation tumbled to zero due to the current lockdown.

As a result, local companies will not only struggle to retain going concern this month but also fail to pay workers.Moyo warned the government against extending the lockdown in the absence of measures to assist the ailing industry which was already reeling under unrelenting economic pressures before Covid-19 erupted.

“Whilst flattening the curve is needed, we need a strategy that shelters and cushions the industry because no company will be left. Eighty-two percent of the companies can only pay one month of the salaries. It means that if we go into month two, companies will fail, so will people continue to go to work?” Moyo said.

He said a bailout package was crucial for industry. “It depends on how long the lockdown is. If the lockdown is extended, we will definitely need a bailout package. Since most companies cannot pay salaries, it means that thereafter you will have problems with thin capitalisation, going concern. Fights are already beginning with auditors on going concern issues. So, these are big challenges. We didn’t have a lot of reserves so we have to watch it. It’s going to be very challenging,” Moyo said.

Meanwhile, CZI president Henry Ruzvidzo told the Independent last week that companies were already counting their losses, which are projected to escalate as the world battles to contain Covid-19.

He said the amount of money for the required stimulus package is difficult to compute, owing to uncertainty surrounding the timelines as to when the disease will be brought under control.

“The national lockdowns which have become a worldwide phenomenon are impacting economies in a big way. Our own circumstances place us in a particularly difficult place and will require the collective effort of all stakeholders to ensure continuity of businesses and resumption of normal economic activity,” Ruzvidzo said.

“The losses are difficult to estimate. Surveys by both large and small businesses are being carried out. The results will, however, not fully represent the full impact on the economy as industry has a large multiplier impact on the economy’s performance.”

The recovery process, he said, would be painful and slow.

“Those on total lockdown will require a stimulus to resume and quickly restore capacity, otherwise the recovery will take a very long time,” Ruzvidzo said.

The country is facing a bleak 2020 with the prospect of recovery remaining grim as companies have already begun to fire workers.

Last week, Air Zimbabwe sent its employees on unpaid leave while other companies, particularly the hospitality sector, fired contract workers.

With Covid-19 cases on the rise, Mnangagwa may extend the lockdown, a move that could further cripple an already struggling economy.

The CZI implored the government to allow firms to re-open, albeit in compliance with strict social distancing measures.The industrial body said companies will not be able to sustain wage bills under the lockdown.

Moyo said with Covid-19 ushering in another global recession, Zimbabwe should improve its industrial capacity.“I think there are a couple of things that are positive from this crisis. For example, we now know that local manufacturing is an absolute must and that guarded or measured globalisation is of importance because when pandemics or global problems strike, you need a local industry in each country. We have been saying this for the past 10 years but it was unpopular because the textbook formula was focussed on comparative advantage but we can see that is theoretical in a global sense,” Moyo said.

He said Zimbabwe should concentrate on producing food and essential services as global pandemics are likely to increase.“We now need to look at what we can produce locally. Even if it is not efficient, for our own sustenance let us be deliberate about what we make. So we are talking about the base-of-pyramid products, your food, pharmaceuticals. In hindsight, we are now seeing all these manufacturers that we allowed to close. So for now it is a big area that we have been advocating for,” Moyo said.

“This is where I think any bailout should focus on. I think we are going to see more global outbreaks, more epidemics and it’s important to have local and regional capacity.”