Zimbabwe diaspora remittances take a knock

By Staff reporter | 10 Apr 2020 at 19:18hrs
COVID-19 is wreaking havoc on diaspora remittances in Zimbabwe where some households, which depend on assistance from relatives abroad, are in dire straits, the Zimbabwe Coalition on Debt and Development (Zimcodd) and Habakkuk Trust have reported.

This came as President Emmerson Mnangagwa yesterday ordered Reserve Bank of Zimbabwe governor John Mangudya to immediately address constraints around money transfer services following complaints from families surviving on diaspora remittances.

Diaspora remittances are a main tool of domestic financing in Zimbabwe, with approximately US$505 million received between January and June last year, while US$699 million was sent to the country in 2017, down from US$799 million in 2016.

The Zimcodd report issued yesterday states that with the 21-day lockdown in Zimbabwe, where there is no significant economic activity, most families in the country who used to survive on diaspora remittances may starve.

"With incomes contracting due to the shutdown and social isolation, most households that depend on the diaspora in Zimbabwe are at risk of hunger and starvation," Zimcodd said.

"The restrictions in terms of movement of goods and disruption of business will have negative effects to the Zimbabwean general population."

It said remittances have been contributing 10% of foreign currency receipts and the expected decline is projected to impact negatively on the country's already acute foreign currency shortages.

"A decline in individual cash remittances is most likely to affect small and medium enterprises in retail, hardware as the remittances form a primary source market for these market players," Zimcodd said.

On Zimbabwe's COVID-19 budget, where US$26 million was injected to fight the pandemic, when government will need an additional US$100 million, Zimcodd said the financial package might not be enough.

"Given the extent to which the COVID-19 is expected to spread, with some countries expecting that the virus will infect 60% to 80% of their population, the financial package unveiled by the government may not be enough.

"An observation by Zimcodd on Zimbabwe's COVID-19 budget reveals that close to half of the budget allocation is towards operational support and logistics, whilst the proposed health budget allocates 52% to national laboratories. The 52% is in line with World Health Organisation guidelines that government should focus on testing for COVID-19 virus as a key measure to fight the virus. But government is yet to prepare an economic response budget."

Approximately 5,7 million people live in extreme poverty in Zimbabwe and Zimcodd said there was need for support of the vulnerable.

"Cognisant that the government's fiscal position does not allow the government to intervene by way of a bailout package, a temporary reduction in individual income tax will leave the populace with additional disposable income to counter COVID-19.

"With the poverty datum line estimated at $4 188 as at December 2019 by ZimStat, it will be prudent for government to review the income tax free threshold from the current $2 000 to a minimum of $4 188 or align it with the poverty datum line," Zimcodd said.
In its report titled Impact of COVID-19 on Rural Communities, Habakkuk Trust said rural communities that rely on children in the diaspora were struggling to make ends meet.

"Some rely heavily on cross-border transporters popularly known as omalayitsha for basic commodities sent by their relatives in neighbouring South Africa and Botswana. However, the closure of borders as a result of the lockdown is likely to have a huge impact on community members whose livelihoods were largely dependent on diaspora remittances."

The report states that rural shops will soon run out of goods, leaving communities exposed.

Citizens who spoke to NewsDay expressed concern over failure to access money and groceries sent by relatives from abroad.

In a statement last night, Mnangagwa said: "Following concerns from users of money transfer services, I have directed the governor of the Reserve Bank of Zimbabwe to immediately address constraints around this essential financial service."

He said the environment arising from the 21-day national lockdown "has increased our people's dependence on remittances, which also have the added advantage of reaching directly the most marginalised members of the nation".

"… livelihoods in the informal sector have been disrupted, thus forcing many households to depend on the support from their loved ones abroad. It is thus critical for the financial service institutions to adapt their operations to the new emergency situation," he said.



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