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How remittances are helping Zimbabwe’s resilience to global trade shocks

FinTech

How remittances are helping Zimbabwe’s resilience to global trade shocks

Like many countries in the world, Zimbabwe has over the last two-and-a-half years suffered the worsening effects of the Covid pandemic, which has adversely affected economies through border closures and limitations on trade activities.

Zimbabwe’s economy is driven by agriculture, and while Covid pandemic restrictions have largely been lifted leading to the full resumption of agricultural trade, the ongoing conflict between Russia and Ukraine has brought logistical challenges and value chain disruptions in fertiliser supplies, a key agricultural input. 

Every year, Zimbabwe imports nearly a quarter of a million tons of nitrate fertiliser from Russia, for use in the cultivation of maize, wheat and its key export, tobacco1. With the Black Sea conflict yet to be resolved, the flow of fertilisers to Zimbabwe has dwindled, leading the currently available stocks to double in price. 

These adversities have impacted farmers, particularly communal and small scale farmers. In addition, inflation and rising fuel prices have resulted in cost increases in transport, goods and services. This has additionally compounded the strain on the population of the country that lives below the international poverty line.

Personal remittances play an imperative role in alleviating this situation. In 2020, the World Bank reported a 28% increase in diaspora inflows, hitting $1.83 billion USD3, a figure that is 88%4 more than the annual foreign aid to the country. These remittances have helped Zimbabweans weather through difficult times during the pandemic, including a tough trade environment, that has to a great extent caused many families to lose their primary sources of income.

Commenting on how remittances play a role in supporting the country’s recovery and resilience efforts, Darryl Pietersen, Head of Southern Africa, WorldRemit said “By providing a platform that Zimbabweans in the diaspora can reliably and affordably use to send money to their families at home, and by ensuring that transactions are complete in minutes for both mobile money and cash pick up options, those in the diaspora can quickly respond to the needs of their loved ones back home.

He added “With over 600 pay-out locations across the country and our robust network, WorldRemit has increased its reach to customers in both rural and peri-urban areas where agriculture is the main economic activity. We are continuously innovating and working to ensure that through our local partners, even more people, including underserved remote communities will have access to our services. As mobile phone and internet penetration in Zimbabwe grows, we will be further optimising our services to reach more people around the world.” 

Zimbabwe currently operates in a multi currency system. Remittances that are sent from the diaspora are received as free funds in USD or converted to Zimbabwe Dollar, and are used to buy household goods, such as groceries and to pay for services, as well as to purchase inputs such as seeds, fertiliser and equipment. Furthermore remittances into farming communities have been seen to play a role in aiding agricultural productivity and growth by providing a buffer between seasons, alleviating credit constraints, increasing crop diversification or specialization and livestock owned.

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