Try toll manufacturing: AfDB

HARARE - The African Development Bank (AfDB) says Zimbabwe’s companies must consider engaging in toll manufacturing to increase the country’s depressed industrial capacity.

Zimbabwean industries, which took a knock during a decade-long hyperinflation, have struggled restart production at full capacity following dollarisation of the economy in 2009.

The firms face lack of affordable credit lines, an acute liquidity crisis and failure to retool among other challenges.

According to the Confederation of Zimbabwe Industries (CZI) 2012 manufacturing survey, local industry is operating at 44,9 percent capacity utilisation.

AfDB, however, believes toll manufacturing — the sub-contracting of a manufacturing job to a third party with the necessary infrastructure and expertise — could help in resuscitating Zimbabwe’s ailing industry.

This comes as listed milk processor Dairibord Holdings resorted to the practice.

The regional institution said such an arrangement is worth exploring as a temporary solution to Zimbabwe’s production challenges.

“If arrangements for such activities are properly structured, local companies could stand to benefit from the low cost production technology once sub-contracting companies eventually exit,” said AfDB adding that the low capacity utilisation in the market can be turned into an opportunity through toll manufacturing.

Under toll manufacturing, the sub-contracting firm is expected to provide raw materials, which the toller transforms into a finished product for a service fee, which is structured to cover the toller’s supplementary inputs, all costs of production, a proportion of overheads and a fair profit.

Toll manufacturing is not new to Zimbabwe as it has been successfully done in the past by companies such as Bindura Nickel Corporation which used to toll process nickel for mines in Botswana.

RioZim also used to toll process nickel for Botswana mines at its Empress Nickel Refinery in Kadoma while Cottco Zimbabwe was toll ginning raw cotton for its Mozambican sister company, Cottco Mozambique.

Cottco Mozambique had no ginneries in Mozambique and was transporting raw cotton into Zimbabwe for conversion into lint at Cottco Mutare ginnery. - John Kachembere

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