Zimbabwe companies can’t afford lockdown extension

According to CZI: “Eliminating subsidies and allowing the exchange rate to converge is the only way to boost production and optimise the use of scarce foreign exchange in this time of crisis. With the magnitude of the crisis we are facing we simply cannot afford wasteful subsidies.

The government may also consider reducing the excise duty on fuel in view of declining oil prices on the international market. This can also act as a stimulus measure for the productive sector considering that when operations resume they will face working capital challenges.”

Informal traders should be allowed to order goods from formal industries and use carts to distribute them directly to customers in residential areas.

“This will have the potential of shifting the informal markets to the residential areas and may contribute to decongesting the city centres during the COVID-19 long haul”.

• With many countries having stopped exporting medical materials, Zimbabwe should respond by building capacity of local pharmaceutical products.
• Allow the key mining sector to keep operating
• Zimbabwe should seek temporary suspension of repayments of Afreximbank loans, some of which are gold-backed. “If such an extension is granted it would free up valuable resources to help keep the country going during the crisis.”
• Business will be unable to pay back loans. Banks, the Public Accountants and Auditors Board and the RBZ must jointly work on a plan on the treatment of loans.
• Government should provide guarantees to allow companies to borrow and restart operations. “Companies could pay a fee for these guarantees which could then be used to fund any losses that the guarantee scheme may end up with.”
• RBZ must provide liquidity support for banks, “in line with international best practice and consistent with maintaining a stable monetary base”.
• Landlords should “show compassion” to businesses that will be unable to pay rent “for reasons which are simply beyond their control”.
• On mortgages and other secured loans, rollovers and extensions of time should be encouraged. Courts should carefully consider any foreclosures, to ensure that due consideration of the crisis can be demonstrated.
• Effective 1 April 2020, PAYE bands must be increased by 200%.
• Employers must be allowed to offset any 2% tax paid in any given month against PAYE due for that month. This will help to subsidise wages and allow employers to sustain the employees during the period of the lockdown.
• The 2% Tax Exempt transaction limit must rise from Z$100 to Z$500. The tax could also be cut to 1% to stimulate demand in the economy
• To avoid stoking inflation, these bailouts must be funded by existing local currency resources, and not by creating new balances.

“In that regard we recommend that government aggressively pursue two avenues: International support from the donor community; issuing of Treasury bills at attractive rates of interest to raise funding from existing RTGS balances.”-NewZwire

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