The African Development Bank (AfDB) says the country’s textile industry remains in a comatose state as it struggles to fend off competition from cheap imports due to undercapitalisation.
AfDB said following the introduction of the multiple currency regime in 2009, the corporate sector was generally characterised by a sluggish recovery mode although many texile companies continued to close shop.
In June 2012, the country’s sole manufacturer of knitting yarn, Karina, applied to the High Court for provisional liquidation. David Whitehead was put under judicial management in 2011.
In February 2012, Continental Fashions, a textile giant that had been operating in Zimbabwe for more than 48 years, filed for bankruptcy after encountering massive cashflow problems.
Other textile companies that have been placed under judicial management include Kalahari Clothing Company, Saybrook Manufacturers and Archer Clothing Company.
In its Zimbabwe Monthly Economic Review for July, the AfDB said the major challenge that is forcing textile firms out of the market was failure to cope with import competition.
“The textile sector continues to play second fiddle to cheap imports from Asia at a time when firms are heavily undercapitalised,” AfDB said.
“Protectionist measures that were introduced through various statutory instruments under the 2012 National Budget have failed to achieve the desired effects as local textile firms have failed to take advantage of protection due to undercapitalisation.”
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The regional bank said what made the situation worse was that downstream value chain was also plagued with problems of cotton farmers holding onto their crop demanding higher prices.
Buyers, under the Cotton Ginners’ Association, have been accused of displaying a monopolistic tendency by teaming up to suppress the prices to levels that were not profitable to farmers.
“However, the intervention measures, which include making the government the sole buyer of the crop through the Agricultural Marketing Authority (AMA), have not helped much as farmers still feel that the prices AMA is offering are still very low,” reads part of the report.
As a result of the suppression of cotton prices, some farmers have shifted to tobacco production.
