Staff Writer


 
Players in the manufacturing sector have not been spared from the adverse effects of coronavirus pandemic. Some were forced to close for months or rather scale down operations in order to limit the spread of the deadly virus.


 
It came as a shock to companies which were already reeling under the pressure of slow economic activity resulting in consumer spending being constrained. The impact of lockdowns to the businesses have resulted in some firms closing down and people losing jobs. This mostly affected those companies that were already operating at low capacity utilisation levels so they were not largely affected.


 
The closure of firms had a huge bearing on the country’s revenue as there was no one to tax. After the relaxation of the first imposed lockdown the economy started to show some signs of recovery as firms were allowed to open but observing World Health Organisations set guidelines at workplaces. Alas as if it was not enough towards winter of last year the country was forced to enter into another lockdown to avoid piling pressure on the dilapidated health institutions.


 
In May 2020, the country unveiled a ZWL$18 billion Economic Recovery and Stimulus Package aimed at revitalizing the economy and providing relief to individuals, families, small businesses and industries impacted by the economic slowdown caused by the Covid-19 pandemic. Despite all that, now industrialists are talking of the need of a second stimulus package to support industries which are still nursing the wounds of previous lockdowns (2020). For now, it is still a long way to freedom for industries to be back where they were prior Covid-19 period.


 
Developing countries have introduced multiple support programs, but businesses most affected by the shock—small firms and those in poorer countries—were the least likely to receive government support, according to the World Bank.


 
So nearly the first half of 2020 was lost due to the deadly virus. According to Investopedia, the capacity utilization rate is a metric used to measure the rate at which potential output levels are being met or used. From that period up to September most of the companies were operating at low capacity. Demand was a bit constrained as most workers were still receiving half pay which was both a lose-lose situation between the employee and the employer.

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From October to December the economy opened and many businesses started to report rise in volumes. This was attributed to the relaxation of the lockdown. As we approached the festive period, a second wave emerged in Zimbabwe and this time around was a bit strong and spreading at a faster rate prompting the return of full lockdown.


 
Month-long restrictions were first imposed in early January and later prolonged until February 15. On top of that another 2 weeks were added despite calls to open up the economy. After the last day of lockdown extension the government heard the cries of the industry and the people and opened up the economy. This was made possible by the start of the vaccination roll out program which aims to inoculate at least 10 million people.


 
So with their finances already weakened by the pandemic and resulting lockdowns, many companies will not be able to take advantage of a recovery that is likely to be fitful.  Recently, clothing retailer Edgars Stores Limited said the ongoing lockdown denied it two months of normal trading, which has severely constrained prospects for Q1 of F2021.


 
Nearly every business in the country has been affected by Covid-19—in different ways. But, those in the food and health industry came out as the beneficiaries of the continued lockdowns as they were allowed to operate. The health sector is where most of the money is going on right now as it is still lucrative.


  
With coronavirus cases still increasing globally, countries and their firms will continue to be affected by health and economic shocks in the foreseeable future, according to the latest World Bank policy research working paper.


 
Surprisingly, the Confederation of Zimbabwe Industries has projected that capacity utilisation will increase to 61% this year underpinned by consistent policy process, currency stability to address, exchange rate stability, inflation reduction, export promotion, buying local and an aggressive vaccination program. Capacity utilisation was at 47% in 2020 from 36.4% in 2019. The anticipated huge jump in capacity utilisation is a bit ambitious considering the shocks that have hit the companies.


 
Capacity utilisation should have been a bit lower in 2020 with recovery expected this year if the vaccination program succeeds. But with the look of things, the vaccination program has had a slow start and we are looking at a possible third wave of the virus the moment our land borders open and trade begins at a larger scale. As a result the predictions of over 60% capacity utilisation might be a wild goose chase.


 
Therefore the most important thing for the long term welfare of the local business sector depends on a successful vaccination campaign and a return to normalcy. A corporate tax break should have been implemented to support local businesses adapting to Covid-19 – Harare

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