Macro Analysis /

Zimbabwe Consumer Sector Report; Loosening The Purse Strings?

  • Relatively moderate inflation, pseudo dollarization and a strong agricultural season have lead to recovery in earnings

  • However, recovery has not been uniform across the country. Urban consumers lost income since the onset of COVID

  • Volumes for consumer facing names on the stock market have been the first to react to increasing consumer spend

Tatenda Makoni
Tatenda Makoni

Equity Sales Trader

IH Securities
21 September 2021
Published byIH Securities

With talk of improving local macros one of the key questions has been, ‘is the Zimbabwean Consumer now in a better position?’

Evolution of civil servants’ earnings from 2018 can be used as a benchmark for the formally employed. Salaries significantly lagged behind inflation in 2019, where y-o-y inflation reached 521% however, from 2020 there was recovery as most employers introduced some form of inflation indexing, an example being the civil servants’ allowance of US$75 that is paid in local currency pegged to the interbank rate. However, earnings are still significantly below 2016 levels.

In the absence of reliable data on the informal economy, sales volumes for consumer facing companies can be used as a proxy for the general consumers’ wellbeing (including the formally and informally employed). The general trend has been that of volumes recovery from the 2nd half of 2020 through to this year.

The increase in earning has not been uniform across the country; 90% of households that operated a non-farm business reported a drop in revenue since the onset of COVID-19 induced restrictions in 2020. This affected urban areas in particular since the proportion of people working for a wage or operating a non-farm business is higher in urban areas than in rural areas. It’s also worth noting that the above average agricultural output meant improved access to ‘own food’ for rural households but not necessarily for urban households.

We remain skewed towards consumer names – we note that these businesses are now experiencing actual volumes growth. This is a departure from 2019 revenues which were driven by hyper-inflation pricing amidst falling volumes.

It is our view that whilst Zimbabwe retains its structural challenges, on a relative basis the consumer is experiencing a recovery in spend albeit off a low base and on a disproportionate basis. This spend is clearly reflected in volumes.