CBZ Bank CEO John Mangudya has urged industry to “remain optimistic” as the euphoria of economic recovery and political stabilisation that gripped the country last year rapidly dims, 20 months into “dollarisation” and “political unity”.
In a note prefacing the 2010 Confederation of Zimbabwe Industries Manufacturing Sector Survey launched in Harare on Wednesday, Mangudya also said “we believe the storm is over”.
Entitled Back to Basics, the survey shows that manufacturing sector plant capacity utilisation, a gauge for recovery, has almost plateaued, increasing “marginally” to 43,7% in the first half from 32,3% last year, amid increased risks such as import competition.
“We had hoped that capacity utilisation would have increased to 60% by this time this year. We could have been too optimistic but the trend remains positive,” Mangudya said.
“As the survey indicates, capacity utilisation has this year only increased marginally, and local industries are still trying to find space in an economy whose devastating effects including years of disrepairs for plant and machinery and the loss of skills to other countries.”
Analysts think Zimbabwe’s recovery, which came after a decade of inexorable recession, has largely been held back by an enduring liquidity squeeze.
Mangudya said CBZ, Zimbabwe’s largest private sector lender and sponsor of the survey, had refocused its lending to operate as a partner of the country’s productive sector in its long march to recovery.
“We need, however to come up with meaningful development strategy or industry policy that prioritises the growth subsectors of the manufacturing sector. We need however to identify areas where we have competitive advantage,” Mangudya said.
Overall, the survey noted that the manufacturing sector, which produces over 6 000 commodities, is improving, albeit at a slower than expected rate due to limited investments.
A majority of the 100 manufacturing companies polled blamed this setback on government’s failure to “address the fundamentals required to attract the much-needed investment”.
According to the survey, the country’s economic recovery is likely to be slow, lengthy and jobless unless the economy subdues the investment watershed primed to buoy firms to higher levels of capacity utilisation, which would in turn lower average costs and improve economies of scale.
The firms surveyed identified lack of working capital (21,9%) as the most eminent bottleneck to capacity utilisation, followed by competition from imports (18,2%), low product demand (15,8%), machinery and plant breakdowns (13,3%) power outages (11,5%) and raw material shortages (10,3%).
They also expect nominal gross domestic product (GDP), the measure of economic value created, to grow marginally to $5,5 billion this year from $5,2 billion last year, driven by the agricultural sector, which reported record tobacco production this year.
The report also shows that deposit rates have stagnanted around 0,05% to 5%, while lending rates diversely varied according to financial institution and tenor of loans.
Low deposit rates are also seen further deterring savings, the nucleus of the domestic liquidity base.