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Preparing for the drought: Realistic responses to Covid-19’s economic impacts in Zimbabwe.

The Covid-19 virus is a crisis that has placed unprecedented pressure on global health systems. The World Health Organization (WHO) and some African countries (Zimbabwe included) have provided reactions that will alleviate the health impacts which understandably are the prime focus as we speak. I raise my hand to argue that Covid-19’s most potent effects on developing countries, especially Africa will be on the economic front. The imminent global recession, a fall in demand, supply shocks all spell economic doom for the developing world. With dire poverty levels, if Covid-19 doesn’t kill the living poor, an acute increase in poverty will. This article details what can be done to mitigate the economic harm of Covid-19 in the short term to medium term (3-6 months) especially if, as I expect, there becomes a need for a city/national lockdown. This will be specific to the Zimbabwean situation which I believe can provide some pointers to the rest of Africa.

So What is the Problem?

Covid-19 has brought economic activity to a halt in the countries worst affected. China’s manufacturing numbers have dropped between 15-40% in the first quarter of 2020. US and European cities have become ghost towns. The Economic Commission for Africa has already detailed a severe cut in Africa’s GDP, with losses especially felt in the fall of commodity prices, the tourism industry and expected food shortages due to supply challenges. Zimbabwe will not be immune to this with the mining, tourism and informal trading industry to be adversely affected. The 3% GDP growth the ZANU PF government was targeting is highly unlikely now.

Of more concern are the effects controlling Covid-19 could have on the economy. In a worst-case scenario where the government may have to fully/partially close borders and/or demand citizens to stay home, the informal sector economy, which caters to 90% of Zimbabweans’ economic needs will essentially be closed. This could last for about three months, but it does not mean people will inadvertently die.

The government can create a short-term social safety net with the cooperation of the private sector, trade unions, and informal sector representatives to alleviate the worst effects of the impending doom. Developed countries have used a mixture of stimulus packages, rate cuts, business loans, unemployment benefits to quell the economic effects of Covid-19. Most of these solutions are alien to the Zimbabwean, let alone the African context. Practical solutions that could work in Zimbabwe are a social cash transfer, SME business loans, suspension of utility payments, free data, and a financial literacy programme to inform citizens to save and be thrifty. I provide more flesh to these solutions below.

Social cash transfer

Zimbabwe has a social cash transfer programme called Zimbabwe’s Harmonized Social Cash Transfer Programme. Started in 2011, this program is a cash transfer to the most vulnerable in rural Zimbabwe that pays out between USD10 to USD25 per month (paid bi-monthly). Currently, the programme supports over 55 000 households. The social cash transfer program can be extended for three months to include the urban poor and informal workers affected by Covid-19 policies. The funding for this program can come from the Intermediated Money Transfer Tax (IMTT) from which the government earned about ZWD$ 2.5 billion last year. These transfers can be done through mobile money platforms that have a near-universal presence among informal workers. Governments, trade unions, and informal sector representatives can work on creating a database of those to be affected. This solution is the core reaction to the coming economic malaise. It allows for the affected to have money to spend, it is an idea that already works, albeit in limited ways across Africa.

Business loans

With the support of the banking system, the government can push for loans to be distributed to Micro, Small to Medium Enterprises (MSMEs) in the country. At least 112 000 MSMEs had bank accounts as of the end of last year. The MSMEs would apply for the loans to cover salaries and wages and pay some other fixed bills. The loans can be given at the prevailing interest rates but the duration of payment will have to be cognizant of the Covi-19 pandemic timeline. The loans can also be provided to larger firms, but priority must be on MSMEs. If we move fast enough, we could tap into the World Bank's US$14 Billion fund for exactly this purpose. These loans must exclude firms owned and controlled by international entities. They can be provided finance from their parent companies who either have cash reserves or can be boosted by stimulus packages from their parent countries. Firms such as Old Mutual, British America Tobacco, Delta Corporation comes into mind.

Free data

The Government along with the telecommunications industry must create a plan to provide some free data for Zimbabweans for 90 days. The free data can come in different ways. It can free data for certain websites and social media platforms so that people are informed and find some entertainment. It can be capped at a certain number of Megabytes or Gigabytes per day. The government could suspend tariffs (through the Postal Telecommunications Regulatory Authority of Zimbabwe) to these institutions as a carrot.

Financial literacy calls

It is vital government and partners inform the public that these are not normal times. This should be done by providing some financial literacy plans that call for Zimbabweans to cut down on frivolous spending including but not limited to alcohol consumption. All spending should be on necessities. This shouldn’t be too difficult because if we are going to be honest, we have been spending on the bare necessities for more than a year now. This will alleviate the pressure on government coffers and ensure that those Zimbabweans who receive formal and informal remittances use them wisely. Additionally, Covid-19 has come at a time a number of Zimbabweans (and Southern Africa) are about to harvest their crops from the farming season. This will aid in temporarily alleviating hunger in the country albeit coming from below-average rainy season. Community funds such known as marounds/stokvels will be key in providing a cushion.

Citizen tax holidays.

It is not a secret that Zimbabweans are taxed left, right, centre. Various taxes are tabled for various reasons. We are used to companies being given tax holidays, but it is time salaried citizens were provided a holiday too! In this pandemic, the government and local authorities would be wise to suspend or reduce utility payments and provide tax breaks for those in the 20-35% tax brackets. I stress again that this will be for a three-six-month period so as to ride the wave of the economic drought that will come with Covid-19 mitigation actions.

Anything else?

I am sure a lot more needs to be done. A silver lining in Zimbabwe and Africa’s torrid economic history is that we know how to survive with the bare minimum. Such frugality will serve us well again. This is just a framework that will help the government, opposition, businesses, as well as citizens, prepare for the immediate shocks that Covid-19 might come with if a lockdown is ordered. But more than these ideas, Covid-19 will call on other aspects of us as Zimbabweans as it has done to the rest of the world. It calls for trade unions to use their mobilization powers to get the informal workers registered for the possible social cash transfer, It calls for understanding and sacrifice from private firms, it calls for a sense of community among Zimbabweans. Covid-19 is the type of disease that one cannot alleviate alone; rich or poor, white or black, ZANU-PF or MDC-A. A wordsmith once said, “crisis is a ladder”. Maybe Covid-19 is the ladder that can bring us together if we try.

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