Zimbabwe’s manufacturing sector has increased five-fold since the formation of a unity government in 2009 but lack of capital and low demand for goods are undermining the industry, the main industrial body said on Wednesday.
The Confederation of Zimbabwe Industries(CZI) said capacity utilisation rose to 57.2 percent by the end of the first half of 2011 from 43.7 percent in the same period last year.
“Notwithstanding the increase in capacity utilisation, the sector is still constrained by several factors which include low product demand, lack of working capital and machine breakdown,” the CZI said.
It said the cost of production also remained high, making locally manufactured goods less competitive than imports from countries such as South Africa, whose products have flooded the Zimbabwean market.
The sector’s contribution to gross domestic product has shrunk to 13 percent from 22 percent in 2000, before the advent of an economic crisis triggered by President Robert Mugabe’s seizure of white-owned commercial farms to resettle landless blacks.
A coalition government set up by Mugabe and his rival, Prime Minister Morgan Tsvangirai in 2009 put Zimbabwe on a recovery path and saw the sector growing by 2.8 percent in 2010.
Zimbabwe adopted multiple currencies including the U.S. dollar and the rand to replace the local dollar, rendered practically value-less by hyper inflation.
Inflation reached 500 billion percent in 2008, forcing many firms to close, with capacity utilisation plummeting to 10 percent at the peak of the crisis that year.
Inflation has since come down sharply to single digits while the economy grew for the first time in a decade in 2009 and is expected to expand by 9.3 percent this year.