As the year 2019 comes to an end, 263Chat Business looks at some notable events that took place within the economy which culminated in mixed fortunes for the country.
It however, has been a tumultuous year characterized by unfavourable conditions on all fronts; be it from the climatic events that ravaged some parts of the country, to the political upheavals unsettling the economy and also a very harsh and unpredictable economic environment.
The economy contracted by around six percent owing to poor agricultural production and acute electricity cuts affecting means of production.
Inflation soared beyond 500 percent while the currency depreciated by over 1 500 percent since January when it was at par with the American dollar closing the year valued at ZWL$ 16.7 to USD 1.
The year opened to a three-day nationwide protest against a 130 percent fuel price increase which brought the country to a standstill from the 14th to the 17th of January.
Business was severely affected with damages from looting and property destruction amounting to over US$ 10 million countrywide.
Government responded by cutting off the internet which went on to affect electronic transactions for banks further plunging the economy into an abyss.
The losses were enormous- with industry lobby group, Confederation of Zimbabwe Industries (CZI) then president, Sifelani Jabangwe declaring the economy had lost business amounting to US$ 300 million during the period.
On monetary policy, authorities introduced a raft of measures to mitigate the foreign currency shortages which were suffocating industry which relies on imported ingredients for production.
This saw the introduction of the interbank foreign exchange market in February targeted at formalizing trading of foreign currency while neutralizing the menacing black market foreign currency trading.
The interbank was hence meant to improve foreign currency availability to companies that want to import essentials for local production.
Lack of transparency regarding to actual offers and bids concluded and listing of companies participating was the biggest undoing by the Reserve Bank of Zimbabwe (RBZ) as this affected the integrity and honesty of the platform.
But the RBZ Governor Dr John Mangudya said as of September a total of US$ 799 million had been traded on the interbank market with analysts however, hinting that foreign currency traded on the platform was insufficient to meet demand hence its availability remained critical going into the New Year.
February also saw the floating of the local RTGS currency marking the end of the 1:1 parity exchange rate with the USD.
This was a positive development in setting the tone for the introduction of the Zimbabwean dollar but unresolved issues on exchange rate pressures would soon undermine the sustainability of the RTGS dollar.
Extremely low exports and illicit foreign currency trading exerted exchange rate pressures on the RTGS dollar and it hastily tumbled over 300 percent in just three months.
In June, Zimbabwe outlawed the multi-currency system establishing the Zimbabwe dollar (ZWL$) as the sole medium of exchange in the country.
However, hyperinflation and lack of confidence in the currency has since seen businesses and the generality of the citizenry lose confidence in the ZWL$ and hence the economy is closing the year tinkering on the brink of total re-dollarization.
Already, the informal sector is charging in USD again while the property sector, particularly the rentals are also pegged in USD.
Also in June, the Auditor General’s Report came out with an expose of chronic malfeasant and extravagant handling of public finances by the public sector.
Notable culprits were the Zimbabwe National Road Administration (ZINARA) which the report suggested it spent ZWL$60 000 on the female managers’ hairstyles, a payment of ZWL$25 000 to one hair salon, ZWL$4 000 spent on installation of gym equipment at the senior executives’ houses.
A forensic audit by Grant Thornton also showed that millions of USD had been inappropriately used by the parastatal dating back from 2012.
Other public institutions such as the ZETDC, ZIMSEC, GMB among others were also found to be scandalous with resources while only 76 of the 179 state enterprises entities submitted financial statements for audit.
The macro-economic environment was highly toxic for business as operational costs heightened prompting businesses to increase consumer prices to remain afloat.
The upward price adjustments however ensured most companies posted significant profit gains despite lower volumes during the course of the year hence paying substantial dividends to shareholders.
Power cuts of up to 16 hours a day spelt enormous economic losses.
The situation has remained unabated and is likely to affect growth prospects for the economy in 2020, analysts have warned.
On the climatic front, Zimbabwe endured one of the deadliest cyclones to be recorded in history-Cyclone Idai which devastated parts of Manicaland and Masvingo provinces in March destroying human lives, settlements, key infrastructure, crops and livestock.
Matters were to be compounded by yet another hazard, cyclone Kenneth, despite being comparatively milder, would deepen the crisis.
“This is a definition of bad luck. To be battered by two deadly cyclones in one year made it difficult for us to achieve our targets under the Transitional Stabilization Program,” Finance and Economic Development Minister Mthuli Ncube commented late November.
However, positively, the ZWL$ has somewhat managed to reach a point stability beginning fourth quarter, oscillating between the ZWL$ 15 -16 against the USD.
While it has been a tough year, the economy remained resilient given the harsh circumstances and the second half of the year saw most companies listed on the ZSE post considerable profit gains.
But shortages of fuel that became the hallmark of 2019 remains the biggest challenge for the economy going into 2020 as foreign currency availability is yet to improve.
