CONSUMER spending patterns in Zimbabwe are pointing to a bleak outlook for 2024, with wages remaining stubbornly low and discretionary income scarce, according to Inter Horizon (IH) Securities, a leading financial services firm.
The assessment suggested that the already cash-strapped consumers are reining in their spending, casting a shadow over the country’s economic prospects.
In its new 2024 consumer sector report, IH Securities said Zimbabwe’s working poverty had grown to 35,35% at the end of last year from 20,17% in 2013.
The International Labour Organisation defines working poverty as the percentage of the working population living on less than US$2,15 a day, using purchasing power parity.
“Wages of the country’s population remain depressed with 34% of the workforce earning below US$90 per month and the 75th percentile falling in the US$272-US$362 income band,” IH Securities said.
“Civil servant salaries have generally been a baseline for wage growth in the country with changes in the private sector tracking public sector developments, and notably we saw steady increments in the USD (United States dollar) portion of wages from a US$75 Covid-19 allowance in 2020 to US$300 as of this year.”
IH Securities said the allowance became pensionable at the start of the year.
“Outlook for consumer-spend based on primary sector performances points to a potentially depressed year,” IH Securities said.
“However, looking at the mining sector, 58% of workers are associated with gold operations which at a high level, are primed for a better year based on elevated prices.
“This might point to more resilient bottom-of-the-pyramid liquidity, added onto the approximately US$2 billion in remittances that the country receives annually.”
According to the Zimbabwe National Statistics Agency, 83% of transactions on key food purchases such as maize, cooking oil, and beef were conducted in the US dollar currency as of the first quarter.
“While the US dollar has provided an alternative store of value to the consumer relative to the then local currency, USD inflation has remained elevated from a combination of domestic and international factors,” IH Securities said.
“As of the end of May, annual USD inflation was at 3,48% and as a result, buying power for consumers within the year would have seen a slight decrease.
“Notably USD inflation for food and non-alcoholic beverages between May 2023 and May 2024 was 4,26%, while non-food USD inflation in the same period was 3,14%.”
IH Securities said the greatest increases in the Consumer Price Index basket of goods were education and transport which have increased 15,4% and 13,5%, respectively.
“The year 2024 is primed to be a challenging year for the economy with growth forecasted at 3,5%, off an already low base as growth is set to be overshadowed by weak performances in the primary sectors.
“In the mining sector, mineral revenues are forecasted to fall 10% in 2024 on depressed mineral prices,” IH Securities said.
The Famine Early Warning Systems Network (Fewsnet) noted in its June 2024 to January 2025 food security outlook that the household purchasing power is largely constrained.
Fewsnet said most poor households relied on informal markets to meet their food needs, often buying small quantities of repackaged food commodities for a single or few meals at a time.
“If a household does not have enough daily income to meet their food needs, they often borrow money to buy food or buy food on credit,” it added. — Standard
