The year 2020 will go down as one of the most challenging periods in human history following a devastating global health crisis that spilled over into an economic calamity, weakening economies and jeopardizing livelihoods world over.
For Zimbabwe, the pandemic could not have come at any worse period than in 2020, just when the economy was expected to rebound from an 8 percent contraction in 2019.
Between March and August the country went into one of the region ‘strictest lockdowns affecting economic activity.
As a result, the economy shrank 4.1 percent in 2020, the Finance and Economic Development Minister said.
Key sectors of the economy were hurt, with tourism being the worst hit.
According to Zimbabwe Tourism Authority (ZTA), the country’s tourism sector lost close to US$ 1 billion this year from COVID-19 disruptions.
However, other legacy challenges continued to drag the economy.
Foreign currency shortages continued to hamper productivity in key sectors of mining, manufacturing, telecommunications and services leading to low output while xchange rate pressures weighed heavily on the local currency.
The Zimbabwe Dollar (ZWL$) opened the year trading at ZWL$ 17 against the US Dollar using a fixed exchange rate system on the interbank market despite the parallel market trading at ZWL$ 25/USD.
This created a widening mismatch in the exchange rate that left most businesses bleeding from exchange rate losses.
In response, authorities issued a series of Statutory Instruments (S.Is) mainly targeting mobile money platforms such as Ecocash, OneMoney and Telecash, which were alleged to be at the core of abuse from illicit money traders.
However, the introduction of the weekly foreign exchange auction system in June by the Reserve Bank of Zimbabwe (RBZ) to a larger extent brought some form of stabilization on the local currency.
To its credit, the Central Bank managed to attract big importers and exporters who naturally trade in foreign currency to establish the exchange rate through an auction system, a development that left street money changers in the cold.
The year 2020 saw inflation ravage the economy, making it difficult for businesses to sustain a local currency as consumer power weakened rapidly.
Annual Inflation reached peak levels at 837.53 percent in July and slowed down to 401.66 percent in November- a figure still unsustainable.
In May and July this year, the Reserve Bank issued new ZWL$ 10 and ZWL$ 20 notes, respectively as authorities moved in to mitigate cash shortages leading to maximum cash withdrawals upped to ZWL$ 1 000.
One of the most eventful occasions on the 2020 calendar was the Zimbabwe Stock Exchange (ZSE).
The bourse opened the first week of 2020 with a market capitalization of ZWL$ 30,052 billion and is set to close at ZWL$ 295,978 billion as of December 30, 2020.
“There isn’t really anything significant to the economy because the rise in value of the ZSE is not based on growth in production output but mere speculating tendencies and the rumor mill around the printing of new notes,” financial analyst, Victor Bhoroma told 263Chat Business in May ahead of the issuance of the new notes.
“What investors are basically doing is that they have realized that most of the counters are undervalued because of the currency depreciation. The assets have not appreciated with inflation level so it means most counters are lagging behind in terms of value. So if there is any growth in money supply most investors will turn to the stock exchange. The demand for shares increases market capitalization,” he added.
The bourse had its share of setbacks in 2020. Foreign investors were predominantly selling equity as sentiment in the ZSE weakened drastically.
At the same time, government succumbed to political pressure from the ruling Zanu PF party when it de-listed fungible shares of Old Mutual, SeedCo and PPC from the ZSE on allegations the value of shares was being used to undermine the local currency.
In October, government launched the Victoria Falls Stock Exchange (VFSE) as an alternative bourse with stocks quoted in foreign currency as investors were growing skeptical of the ZSE.
To date, only SeedCo International is the sole listed company on the VFSE as the country struggles to attract foreign investment.
The year ended on a promising note, with the economy re-dollarizing, giving value to incomes and improving purchasing power particularly in the informal and private sectors.
