Despite assurance of a bailout package by the government, small and medium enterprises (SMEs) players are fretting over an uncertain future in business as government is procrastinating on its promise, 263Chat Business has established.
Zimbabwe’s SMEs sector has been inactive for over a month now as the country observed lockdown restrictions to curb the spread of the Covid-19.
Earlier, Government indicated that it would provide grants to the sector during the lockdown period but up to now nothing has been disbursed as yet, a local small businesses lobby group has lamented.
“There is nothing up to now,” SMEs Association of Zimbabwe founder, Farai Mutambanengwe told 263Chat.
“They (government) promised they are going to give us grants to rescue our business. So far nothing has happened,” he added.
Most businesses were already struggling prior to the pandemic due to a difficult macroeconomic environment in the country.
“The extension of the lockdown by a further 14 days has left many SMEs in a difficult position as all their savings have had to be spent on basic food stuffs to survive the lockdown. This means when lockdown is over there won’t be any working capital,” added Mutambanengwe.
Zimbabwe has a very huge informal sector base, the second in the world after Bolivia at 60.9 percent of total economy and threats to businesses in this sector could spell catastrophic outcomes for the economy.
Analysts have already predicted that most SMEs will take long to recover from losses incurred during lockdown and without a bailout package, millions of jobs are on the line.
The SMEs sector needs on average of ZWL$500 million in stimulus, Mutambanengwe said.
This week, Finance and Economic Development Minister, Mthuli Ncube said a rescue package was in the pipeline in weeks ahead.
However, analysts have reiterated that a rescue plan for small businesses should be availed in time for lockdown exit.
Instead, contrary to support SME, government has been destroying illegal vending sites without offering new sites for organised vending.
Government response has been slow in assisting businesses in this difficult period and most businesses are already in distress, it has emerged.
Local industry has been calling for an interim scrapping of VAT and a reduction of taxes to create breathing space for businesses during the lockdown but government has not yet granted any relief measures.
Other countries in the region were quick to avail cushioning packages for businesses that are succumbing due to lockdown.
A fortnight ago, South Africa announced a half a trillion Rand (R 500 billion) fund to offer relief to distressed businesses and revive the economy.
Zimbabwe is expected to make use of the ZWL 500 million venture capital set aside in the 2020 fiscal budget, a figure analysts say is too modest given the task at hand.
“I get the impression that the support will be accommodated under the ZWL$500 million venture capital facility which was already budgeted for,” economic analyst, Persistence Gwanyanya said in an interview.
“Clearly this amount which calculates to a few million dollars in USD terms is not enough to meet the requirements of our ailing industry and businesses,” he added.
Unlike its peers, Zimbabwe has already been exempted from funding by the IMF due to frosty political undercurrents with the Bretton Woods institutions.
This is set to complicate Zimbabwean government’s position to raise adequate funds to save local businesses.
In contrast, South Africa intends to raise R 95 billion Covid-19 funding from IMF, World Bank and its National Development Bank.
