Zimbabwe’s Diaspora remittances jumped 58 percent last year, to about US$1 billion, a development that helped the country to cover gaps left by trade disruptions caused by the Covid-19 pandemic.
On account of the improved remittances inflows, Zimbabwe managed to record a current account surplus.
The current account records the value of exports and imports of both goods and services and international transfers of capital. Zimbabwe’s Diaspora remittances defied projected a slowdown in inflows due to the pandemic to hit record levels of about US$1 billion.
The World Bank, in its latest Zimbabwe Economic Update, said remittances contributed to the country’s resilience to the regional and global trade shocks.
“Despite trade disruptions and the sharp decline in global economic activity caused by the pandemic, Zimbabwe’s current account remained in surplus at 5,3 percent in 2020.
“A key driver of the surplus was remittances in 2020, which saw a growth of 58 percent. The increase in formal remittances may reflect the shift to greater use of official channels for remittance delivery due to the pandemic,” said the World Bank.
Although the pandemic-driven trade disruptions did have a negative impact on Zimbabwe’s foreign currency generation, a positive was that the country’s imports were significantly reduced.
Authorities have, for years, been fighting importation of ‘non-essential’ goods.
“Adjustment of trade started in April 2020, when the Government and neighbouring countries initiated pandemic containment measures affecting domestic and cross-border movement of goods and people.
“Trade disruptions were more pronounced on imports than on exports, but imports rebounded more quickly, growing by 4 percent in nominal terms on the account of higher demand for maize and other grains, fertiliser, and electricity – as a result of the persistent drought,”
said the Bretton Woods institution.
“Fuel imports, however, dropped by 51,1 percent year-on-year in response to successive lockdowns, weakening economic activity and loss of disposable incomes. Exports grew by 2,7 percent, driven by platinum, nickel, and diamond with traditional key export commodities like tobacco, gold and chromium declining in 2020.
“Despite a sharp increase in global gold prices and gold incentives provided by RBZ, gold exports declined by 7,8 percent, partly reflecting an increased level of smuggling of gold from Zimbabwe.
“Travel and border restrictions and fear of contagion also led to sharply reduced international travel and transport receipts, which are important sources of foreign exchange.”
Meanwhile, with Zimbabwe (and most countries) still dealing with the “third wave” of the health pandemic, the threats to the performance of the current account are still potent.
And indications are that they may have been worsened by the recent violent protests in South Africa, which is Zimbabwe’s biggest trading partner and a vital part of trade routes into the region and into international markets.
“The economic impact is, firstly, two-fold. We are focused on the imports, but we need to focus on what we export through South Africa. What we are unable to move out of Zimbabwe for earning income is significant.
“There is a third dimension, which is what is being illicitly transacted during this time of chaos and what opportunities are being created for criminal networks and bypassing the accountability of the State for both South Africa and Sadc,” said international constitutional lawyer Brian Kagoro recently.
“I think the biggest impact on Sadc will also be the fourth dimension, which is Diaspora remittances. When you say the factories, the warehouses and health facilities are being burnt down, we are talking about South African jobs, but we are also talking about jobs for Sadc folks. Reconstruction will take time; it means those people who were employed in those sectors have lost sources of income.”