PRIVATE SECTOR GAINING MOMENT

ZAMBIA’S private sector last month showed signs of recovery despite the persistent contraction to record the highest Purchasing Managers’ Index (PMI) reading since the start of the Covid-19 outbreak in March.

This is despite the sector recording further reductions in output, new orders, and employment for the sixth successive month while input costs rose for first time in four months.

From the time the Covid-19 pandemic caused contraction in all the industries in Zambia, we have seen that some industries such as tourism and manufacturing are slowly recovering.

Most players in the private sector have started to show resilience to Covid-19 by adopting the normal way of conducting businesses.

These players have adopted the digital way of conducting business which some of them have testified the positive outcomes as well as riding on Government’s relief packages.

Stanbic Bank’s PMI for July 2020 indicates circumstantial evidence suggests Covid-19 remains the main factor affecting business conditions even in July.

Stanbic Bank Head of Global Markets, Victor Chileshe, however said there are signs that the worst of the downturn may have passed with the PMI reading posting its highest reading since March 2020.

This is despite the business conditions continuing to deteriorate.

“What we saw in July was that the rates of decline in output and new orders eased further from what we had in May despite business conditions continuing to deteriorate during the month. Operating conditions have now contracted for 17 successive months,” Mr Chileshesaid.

At 44.6, the headline PMI for July recorded a marginal improvement on June’s 42.3. 

Zambia has predominantly focused on putting up a range of measures to contain the spread of the pandemic within the Zambian economy.

To protect the private sector from collapsing and from the negative impact of the Covid-19 outbreak, Government suspended excise duty on imported ethanol for use in alcohol based sanitisers and other medicine related activities subject to guidelines to be issued by Zambia Revenue Authority;

The state remove provisions of Statutory Instrument 90 relating to claim of Value Added Tax on imported spare parts, lubricants and stationery to ease pressure on companies.

It also suspended import duties on the importation of concentrates in the mining sector to ease pressure on the sector and export duty on precious metals and crocodile skin.

Business has an important role to play in addressing the health and economic impacts of this crisis.

While small businesses often have fewer options and greater constraints, many are still stepping up, including by providing flexibility for their workforce to choose between reduced hours or applying for unemployment insurance.

The outbreak has quickly evolving from a health emergency into a full-blown economic crisis, spreading rapidly throughout the financial sector and the real economy.

According to the World Bank, targeting of support should be kept as simple as possible during the response phase, and gradually evolve during the recovery phase by taking into account new circumstances and firms’ characteristics. 

Targeting the support to the firms most affected, and more deserving, has various advantages. 

First, it preserves scarce fiscal resources. Second, it helps ensure that firms receive an adequate level of support in line with their immediate needs, given the short-term effect of the shock. 

In the absence of targeting, interventions could be insufficient for those firms that need them the most and superfluous – or, even worse, distortive – for firms who don’t need them.

At some point however, Covid-19 will be behind us, but customers, workers, investors, and shareholders can reward those companies that put society first and their profits second.