eBusiness Weekly
Tawanda Musarurwa
Zimbabwe’s listed manufacturers that are struggling with low local demand for their products, now face perhaps an even bigger problem – a halt in production for a yet undetermined period of time due to the impact of the coronavirus (Covid-19).
With countries across the globe, including neighbouring South Africa, having been forced by the global pandemic to implement national shut-downs, one might be looming for Zimbabwe if the country’s infection curve continues to rise.
So far three cases of Covid-19 have been confirmed in the country.
An analysis of some of Zimbabwe’s key industrial firms’ latest financial results show that weakening consumer demand, attributable to inflationary pressures, a depreciating Zimbabwe dollar and low disposable income, has dragged down the performance of most of these firms.
Conglomerate Innscor Africa Limited posted mixed volume performance across its three main segments of mill-bake, protein and other light manufacturing businesses for the half year to December 31, 2019. The Bakery division under the Mill-Bake segment recorded a 45 percent drop in loaf volumes.
The group’s associate company, Profeeds, recorded a 27 percent fall in feed volumes and 33 percent decline in day-old chick volumes compared to previous year, while the Colcom division posted 17 percent drop in overall sales volumes.
Irvine’s frozen chicken volumes, however, plummeted by 14 percent behind previous year.
Innscor subsidiary, the listed agro-industrial firm, National Foods Holdings Limited, saw total volumes for the half year to December 31, 2019 decline by 32 percent as the majority of its segments (save for the maize division) all recorded declines.
Wines and spirits producer, African Distillers Limited (Afdis), another listed firm, recorded a 35 percent decline in total volumes for the half year to December 31, 2019 compared to the prior comparable period.
Axia subsidiary, Distribution Group Africa (DGA)’s volume uptake for the half year to December 31, 2019 was 39 percent lower compared to the same period previously.
And cement maker PPC Zimbabwe’s volumes for the 11 months to February 2020, were 15 percent weaker compared to same period last year.
General lower uptake of locally produced goods is a result of declining consumer demand in the country due to the prevailing economic climate.
But the country’s manufacturers now even face what is perhaps a bigger problem, due to its extreme levels of disruption and uncertainty.
A shut-down resulting from the COVID-19 pandemic could last anything from weeks, to months, to a year, and perhaps beyond.
Although there has been a lot of talk about a shift towards “working from home”, the prospects for industrial firms are completely different as they are characterised by huge factories — some automated, some not — which require significant levels of manpower.
A total shut-down would mean complete stoppage of operations for such entities.
The International Monetary Fund (IMF) has highlighted some supply shocks that have already hit business entities at a global level as a result of Covid-19.
“Business disruptions have lowered production, creating shocks to supply. In the supply side, there is a direct reduction in the supply of labour from unwell workers, from caregivers who have to take care of kids because of school closures, and sadly, from increased mortality,” said the Bretton Woods institution.
“But an even larger effect on economic activity occurs because of efforts to contain the spread of the disease through lockdowns and quarantines, which lead to a drop in capacity utilisation.
“In addition, firms that rely on supply chains may be unable to get the parts they need, whether domestically or internationally. For example, China is an important supplier of intermediate goods to the rest of the world, particularly in electronics, automobiles, and machinery and equipment.
“The disruption there is already having knock-on effects to downstream firms. Together, these disruptions contribute to a rise in business costs and constitute a negative productivity shock, reducing economic activity.”
Around 400 000 infections of COVID-19 have been recorded in numerous countries across the globe and most countries have responded shutting or partially shutting down economies, which is likely to have long-term effects on industries.
The World Economic Forum (WEF) has, however, said businesses should take this pandemic as an opportunity to enhance their crisis response mechanisms.
“Beyond standard concerns related to business operational continuity, employee protection and market preservation, businesses — and countries — should take a fresh look at their exposure to complex and evolving inter-dependencies that could compound the effects of pandemics and other crises.
“Given the panic and neglect cycle of pandemic preparedness, once COVID-19 is contained, much of the world is likely to return to complacency and remain under-prepared for the inevitable next outbreak.
“Businesses that invest in strategic, operational and financial resilience to emerging global risks will be better positioned to respond and recover.”
