Like we predicted a few weeks ago, coronavirus’s coming to Zimbabwe was pretty much inevitable given the fact that it was already a pandemic and the government’s measures to prevent it’s coming were woefully inadequate. So now it is official, we have about 3 confirmed cases of coronavirus already. However, the coronavirus is more than just a health scare it brings with it economic death too, the likes of which Zimbabwe last experienced back in 2008.
Some likely economic effects of coronavirus
- Remittances are likely to fall as those in the Diaspora in countries such as China, South Africa (this is where the majority of the Diaspora is found), the UK, USA, Canada etc go through the quarantine period and are not going to work.
- The virus’s coming to Zimbabwe is likely to affect the tobacco season which has already been delayed to the government’s greed as it wants to steal 50% of what farmers earn and give them worthless RTGS.
- China is one of Zimbabwe’s largest tobacco buyers and it’s unlikely to be buying much in the current environment, in fact, most countries that normally buy our exports are not going to be buying anything.
- These countries are not exporting much either which means businesses in Zimbabwe that rely on imports from China etc are already facing a serious crisis.
- Tourists another source of our precious revenue have also but dried up. Most of these come from countries that are under lockdown and people are not being allowed to get out of their homes, much less get on a plane.
- We are likely to have shutdowns of our own which will grind business to a halt even in Zimbabwe
- When the current shutdowns end the world will almost certainly be going through a recession. Those rich nations that the government relies on for handouts even as they insult them are unlikely to be in a giving mood.
How to mitigate the effects of the coming economic recession
Our colleagues at Zimbollar have a number of ideas on how to ease the effects of this recession:
- Suspend Income Tax -to make sure individuals have more dollars in their pockets to weather the storm, Gvt ought to provide at least a 3month tax holiday to all workers on income tax. This will boost consumption and economic activity
- Suspend Corporate Tax Our-government has no capacity to bail out strategic corporate. However, a suspension of corporate tax will ease the burden of declining sales due to low economic activity as a result of the pandemic. The government can still collect taxes through VAT on sales.
- Repayment Holidays on loans– To cushion borrowers from the default, Banks can extent repayment holidays on Principal amounts. However, borrowers should honour the payment of interest until such a time when things return to normal!
- Redirect the 2% loans to social welfare-There is need for the Gvt to redirect the 2% IMTT Tax revenues to support efforts to curb and contain the Covid-19 pandemic. This measure will be married to the campaign for Social Isolation and the use of digital platforms.