The Zimbabwe Stock Exchange has issued a cautionary statement to investors for trading during the 21-day lockdown. The aim of the lockdown is to contain the potential spread of the COVID-19 global pandemic which so far has 8 reported cases in the country, one of those a fatality. The ZSE advised investors to trade with caution as some of the listed entities have been completely shut down during the lockdown. The statement is meant to protect investors.
With the lockdown restricting business to mainly essential services some listed entities have had business grind to a complete halt. This obviously has cashflow implications on the short term but may also have profitability and sustainability implications in the long term. It is not clear yet what the goal of the lockdown is beside the general goal of curbing the spread. As such it is hard to tell when the goal will be achieved and therefore when the lockdown will end.
Alcohol sales barred
In an update to the lockdown regulation government moved to bar the sales of alcohol during the remainder of the period. Consider the effect on the revenues of a company that is no stranger to the perils of the Zimbabwean economic environment, listed entity Delta. Values on the ZSE may not reflect the viability of the business in a time where no sales are allowed. If the lockdown lasts longer than 30 days what are the implications for Delta’s sustainability? Of course, Delta is not only comprised of alcoholic beverage business but that is a large component of their business.
The ZSE has advised all listed firms to publish investor advice in the form of a Special Trading Update by May 15th. The update will give the effects of COVID-19 on the issuer and statement on the business continuity plan adopted by the issuer in light of COVID-19 and the lockdown order. It will also be a statement on the solvency position of the issuer in light of the effects of COVID-19 and the lockdown order on its business. This is meant to give the public a better understanding of the state of affairs post lockdown.
The effects of the COVID-19 pandemic and the measures that have been resorted to, to deal with it will be far-reaching. The reality is, even in the unlikely event that the lockdown lasts the 21 days, recovery from the pandemic will take much longer than anticipated. With many in the informal sector prejudiced of income, aggregate demand is certain to slow. Couple that with a slow down in exports as export markets also struggle with the pandemic and we may well have to write off the bulk of if not all of, the year 2020.