The Small to Medium Enterprises (SME) sector is set for another excruciating wait on the sidelines following government’s decision to tighten lockdown restrictions following a recent spike in Covid-19 cases.
President Emmerson Mnangagwa yesterday announced tighter lockdown measures to minimize movement and curb the spread of the virus, with only formal businesses allowed to operate.
However, the SMEs sector, characterized by high levels of informality is yet to fully reopen since the initial lockdown restrictions effected late March.
The latest move is hence a major blow on the already fragile emerging businesses.
“Its going to hurt us so badly. We were starting to recover from the effects of the initial three month lockdown and now this will kill our business completely,” one informal clothing trader in the CBD told 263Chat Business.
“We haven’t been given adequate places to sell yet they chase us here,” he added.
Zimbabwe has the world’s second highest informal economy after Bolivia, and for an average adult to afford a decent meal, one has to conduct some form of trade each day.
Yet for most informal traders, no bailout has been granted by the government since Covid-19 pandemic hit the country beginning of March this year.
Government has since availed a ZWL 18 billion stimulus to businesses at 20 percent interest rate, a rate widely deemed unsustainable for bailing out smaller businesses.
Furthermore, most SMEs do not qualify for the bailout package given that over 70 percent of the players in the sector are not officially registered.
“Its a huge impact if you look at where we are right now. We have lost four months of this year so far,” SMEs Association chief executive, Farai Mutambanengwe said.
“Relaxation of restrictions applies to large companies which are formalized. Slowly were we starting to see some degree of relaxation but now we are back to the start. Its devastating,” he added.
SMEs make two thirds of total businesses in the country, and there are fears most businesses in the sector are at greater risk of closure, analysts warn.
Last week , Finance and Economic Development Minister, Mthuli Ncube said the economy will contract by 4.5 percent due to Covid-19 impact but the full impact on the economy is believed to be much worse than projected due to the intricacy of gauging informal sector losses.
However, with Covid-19 cases on the rise, and a biting economy at hand, Mnangagwa’s administration have tough choices to make, and balancing the two remains a very delicate act.
