Industry crisis worsens

HARARE - Zimbabwe's manufacturing sector remains in a crisis, with capacity utilisation plummeting to 39 percent from 44, 2 percent in the year to September 2013, a latest industry survey has revealed.

According to the Confederation of Zimbabwe Industries (CZI)’s 2013 manufacturing sector report released yesterday, the country’s industry continues to be depressed despite improvements in the macro-economic conditions.

The decline in industry performance comes at a time when the economy — which showed signs of improvement during the four-year coalition government, growing an average of seven percent between 2009 and 2012 ? is deteriorating, with this year’s targeted gross domestic product growth already revised downwards from five percent to 3,4 percent.

Charles Msipa, CZI’s president, yesterday said that “capacity utilisation was declining, in some accounts by alarming margins, leading to downstream effects such as underemployment, retrenchments, and reduced activity of the domestic economy.”

“Stagnation has condemned the fortunes of business, and choked operations for a significant number of companies.

“Indications are that tertiary institutions have to make bigger strides towards adjusting curricula, and assisting in diversifying industry’s technology,” he said.

Msipa noted that the decline in manufacturing industry activity was due to limited working capital, lack of demand and cheap imports.

“The cost of labour has dented meagre profits, forcing retrenchments that are adding to a depressingly large pool of unemployment. It is no pleasant sight, indeed the matters in industry need immediate address,” he added.

The survey noted that the worst performing manufacturing sub-sector, leather and allied products, for 2013 is operating at capacity utilisation of as low as 11,3 percent while the best performing sub-sector, bakery, is operating at 82,5 percent.

Pharmaceuticals also dropped significantly to 20 percent capacity utilisation in 2013 from 58 percent last year.

John Mangudya, CBZ Holdings’ chief executive, added that it was imperative for the new government to prioritise industry revival.

“Industry is one of the key parameters of economic growth the world over. Our economy cannot grow without industry because that’s were value addition is found,” he said.

“Zimbabwe must move away from being an agriculture-based economy to a diversified economy.”

Economic experts assert that unless the indigenisation policy ? compelling foreign-owned firms operating in Zimbabwe to cede 51 percent shareholding to black locals ? is revised, it will remain difficult to attract meaningful investment.

Lorraine Chikanya, CZI’s chief economist, said there was need to strike a balance between indigenisation and investment in order to enhance both employment levels and output.

“The formulation and implementation of confidence boosting policies that best serve the economy’s competitive advantages should be made a top priority as this will help put the economy in general and the manufacturing sector in particular on a sustainable growth path,” she said.

Mike Bimha, the newly-appointed Industry and Commerce minister, said government was crafting a new blue print with the remedies of industry playing a critical role in the policy.

“We have so far identified cluster sectors such as the leather and allied, clothing and textile and the pharmaceutical for value addition,” he said.

Comments (1)

As long as we are using 1960s methodologies to manage the economy, we are doomed. We have to diversify the economy for sure. Agriculture my foot!

Peter - 4 October 2013

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