Zim economy to sink further - Economists

HARARE - Economists have warned of further economic growth decline following the contraction of the manufacturing industry capacity utilisation by 13 percent due to constricted credit lines, power outages and high utilities bills.  

Manufacturing industry capacity utilisation is one of the key indicators of the economy’s health.

According to the 2012 Confederation of Zimbabwe Industries (CZI) state of the manufacturing sector survey released this week, average manufacturing output grew below two percent.

The survey states that the sector’s capacity utilization declined from 57,2 percent to 44,2  percent with the worst performing manufacturing sub-sector, the leather and allied products, operating on as low as 27,5 percent.

John Robertson, a leading independent, said Finance minister Tendai Biti will be forced to further revise his 2012 economic growth projections as a result of the non-performance of the manufacturing industry.

“The only positive indicator we had this year was firming tobacco prices, which we were lucky to get because of external factors. All other sectors have failed to perform,” said Robertson.

“In line with the International Monetary Fund predictions, Zimbabwe’s economic growth is likely to be around three percent,” he added.

Biti has been forced to revise this year’s gross domestic product growth from 9,4 percent to 5,6 percent – with indications that it might be revised further down to around 4 percent - mainly as a result of the underperformance of the agriculture and mining sectors.

Robertson warned that the decline of the manufacturing industry capacity utilisation will have negative downstream implications and would exert increased social pressure on families due to impending job losses.

“Industry is not working because agriculture is at a standstill. We are to blame for the problems we are facing,” he said.

“The indigenisation policy must be rescinded out of the country’s statutes and government must restore property rights to boost agriculture and help attract foreign direct investments,” he said.

Manufacturing is one of the four main pillars of the economy along with mining, agriculture and tourism.

It is directly related to the agriculture sector as it consumes and processes over 60 percent of its produce.

This comes as the majority of local firms, without links to multi-nationals, have struggled to raise funding to recapitalise.

The general view from the survey is that policy inconsistencies and ambiguity have resulted in capital flight and reluctance of foreign investors to make significant investments across all sectors of the economy.

 The analysis also indicates that 60 percent of the manufacturing firms face competition from both local and international markets.

 “The sector is in dire need of investment, and it is clear that the local banking sector does not have the capacity to meet the needs of industry, hence the need for foreign direct investment,” said CZI.

“From the respondents there was also a distinct call for protection. Others called for outright protection of industry, while others felt that there is need for CZI to promote an incubation strategy.”

Manufacturing export sales have remained unchanged at 15 percent of total turnover.  The poor competitiveness of local products on the export market is the major reason for unchanged growth in export sales.
Zambia remains the top export destination for manufactured products receiving 30 percent of the manufacturing share of exports.
It is followed by Mozambique and South Africa (SA) dropped to fourth position.

SA tops the list of competing imported products with 85 percent respondents indicating that they compete with South African products while 66 percent of the competing products are from China.

 The survey also showed that 31 percent of the respondents indicated that business has not improved at all and has actually been declining with 24 percent indicating a slight increase while 10 percent recorded a significant improvement in business viability.

In 2011, the survey revealed, the total number of companies which carried out new capital investment increased by 11 percent. Of these, 93 percent invested in machinery and equipment whilst seven percent was invested in land and buildings. - John Kachembere

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