Economy / 24 November 2016, 07:25am / Tawanda Karombo
Harare - Here is some good news from Zimbabwe. Capacity utilisation in the country’s manufacturing sector has improved but this is unlikely to improve confidence in the economy, especially with retrenchments mounting and only about 18 percent of companies managing to sink money into capital investment.
The Confederation of Zimbabwe Industries (CZI) said yesterday that results of a survey into Zimbabwe’s manufacturing sector showed capacity utilisation improving 13 percentage points to 47 percent in the year to date.
“We have 47.4 percent overall capacity utilisation for the manufacturing sector and this is an improvement of about 13 percent on the past year,” said Daphine Mazambani, an economist with CZI, which represents major industry and manufacturing companies.
In terms of capacity utilisation, 54 percent of Zimbabwean industries “are operating at between 0 percent and 49 percent, while 20 percent are operating at between 50 percent and 70 percent, the survey results show. Only about 8 percent are operating at 100 percent, while 12 percent of manufacturing firms were running at between 71 percent and 90 percent.
PPC, Tiger Brands and Tongaat Hulett are among South African firms that have manufacturing units in Zimbabwe. Other major international and local producers in the country include Lafarge Cement, Dairibord Holdings, Delta Corporation and Innscor Africa.
South Africa has been the biggest threat and major mainstay of Zimbabwe’s manufacturing sector. The survey showed South Africa remaining as the “highest source of competition” in terms of imported goods. About 54 percent of Zimbabwean firms that procure raw materials from outside the country get supplies from South Africa, 15 percent from China and more than 5 percent from Zambia.
In the past two years to date, more than 24 percent of manufacturing companies have had to institute retrenchments as a survival measure and 74 percent reduced working hours due to a decline in aggregate demand while 15 percent had to reduce labour costs.
The CZI report said firms that had retrenched cited a decline in business, operational challenges, cost-cutting.
Factors affecting input supplies were cited as prices and import duties, and import restrictions and the availability of funds.
However, according to the survey, corruption, policy instability, curtailed access to finance and competition from imports were the major factors afflicting the industrial sector.
Zimbabwe imposed restrictions on imports of finished products to protect its local industry. Although this helped some companies recover, it also resulted in procurement hurdles for supermarkets and raw material hurdles for producers.
“The factor with the most impact on business is corruption, followed by policy instability, access to finance, competition from imports and low demand for local products,” the survey report said.
About 18 percent of surveyed manufacturers in Zimbabwe said they had undertaken capital investment and this had been used for investment in “machinery and equipment”. In particular, they used the money for “diversification, to expand and to replace old machinery”.