Watch: Pandemic causing huge losses for Mozambican businesses – AIM

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Watch: Pandemic causing huge losses for Mozambican businesses – AIM

8:47 CAT | 14 Aug 2020

Photo: TVM

Mozambican private businesses have lost about 31 billion meticais (436 million US dollars at current exchange rates) due to the economic impact of the Covid-19 pandemic, according to a study released in Maputo today by the Confederation of Mozambican Business Associations (CTA).

The study warned that the situation could worsen, depending on the evolution of the pandemic and of the economic dynamics in the second half of the year. The lost revenue for business could rise to 951 million dollars, equivalent to about seven per cent of Mozambique’s Gross Domestic Product.

The study, presented by the CTA’s acting chairperson, Alvaro Massinga, claimed that the level of economic activity fell by about 65 per cent in the first half of the year. The area most affected was tourism and the hotel industry, where the level of activity shrank by more than 75 per cent.

Nonetheless, Massinga was hopeful that there will be “a timid recovery in business activity in the second half of the year, due to the gradual reopening of some sectors, and the relaxation of some of the restrictions imposed under the state of emergency”.

But this recovery, he warned, would be strongly dependent on how the pandemic evolves in South Africa, which is Mozambique’s main trading partner, as well as the continued lifting by the government of restrictions on business activity.

As for economic growth, the forecasts for 2020 vary from a growth rate of 1.1 per cent in an optimistic scenario, to a contraction by 0.5 per cent, in the pessimistic scenario, which is now regarded as more likely. The growth rate in 2019 was 2.2 per cent.

According to Massinga, the pessimistic scenario is based on the structural rigidity of the Mozambican economy, on continuing the state of emergency in the second half of the year (which implies continued restrictions on business activity), and on continued restrictions on the cross-border movement of Mozambique’s main trading partners, particularly South African businesses. South Africa accounts for about 30 per cent of Mozambique’s foreign trade.

“On this basis, we believe that the pessimistic scenario, which envisages a negative growth rate, of minus 0.5 per cent, will prevail”, said Massinga. “However, depending on how the measures taken under the state of emergency affect the business sector in the second half of the year, and the evolution of the pandemic on the South African economy, the growth rate might gradually recover, and reverse the trend to negative growth”.