“FROM industrial hub to a ghost town” is a phrase which best describes the demise of Bulawayo, Zimbabwe’s second largest city.
Report by Nqobile Bhebhe Senior Business Reporter
Companies in the Belmont Industrial Zone have, since the adoption of the multiple currency system in 2009, struggled to compete for market share both on the domestic and export front.
With archaic machinery, high operating costs and limited long-term capital, the unfolding de-industrialisation of the economy continues to accelerate.
Official statistics show that nearly 100 firms have closed shop in Bulawayo, with several others relocating to the capital to remain afloat.
Experts now anticipate that most manufacturing firms, which are currently on a downward spiral, will face a bleak future next year unless the government introduces a stimulus package.
Already, Treasury projects that at least $4 billion is required to stimulate growth, a Herculean task for the debt-ridden country Zimbabwe National Chamber of Commerce (ZNCC) Bulawayo branch chairperson Ntombenhle Moyo said the operating conditions for many companies in the city were harsh.
“We have endured a bad business climate. The closure of firms, one after the other, was a major highlight this year,” she said.
Moyo said existing firms were struggling to meet operational costs and were saddled with huge wage backlogs.
“What we are getting from the industry is that most firms are three to six months behind on salaries alone and we feel that the trend is the same for utilities,” she said.
It is understood that some firms have resorted to settling outstanding wages and salaries in the form of shoes, among other products.
Indications on the ground point to a bleak 2013 with analysts projecting that some firms would struggle reopening after the December-January annual shutdown.
“The business community here doesn’t expect any drastic changes for the better. The future is bleak,” Moyo said.
“What is fuelling this is that they have completely lost hope on the government intervention through Dimaf (Distressed Industries and Marginalised Areas Fund).
“Initially, Dimaf energised the sector and brought a glimmer of hope that industries would be revived.
“However, they (business community) have realised that it was all talk by politicians.”
Association for Business in Zimbabwe (Abuz) chief executive officer Lucky Mlilo warned that a high number of companies applying for voluntary liquidation signalled tough times ahead.
He added that the situation could deteriorate, triggered by intimidation and violence that characterises the country’s general elections. President Robert Mugabe is pushing for elections by end of March next year.
“The trend of company closure is set to spill over to next year,” Mlilo said.
“This year we witnessed numerous firms seeking voluntary liquidation which is a sign that the operating environment is not conducive.
“With elections planned for early next year, some firms might delay to re-open in January.”
Statistics from the Confederation of Zimbabwe Industries indicate that capacity utilisation for the manufacturing sector this year plunged to 44,2%, from 57,2% in 2011.
According to the 2012 manufacturing sector survey report, performance of local firms dipped for the first time since dollarisation due to capital constraints, policy inconsistency and subdued exports.
The worst performing manufacturing sub-sector, according to the survey which sampled 200 companies across the country, was the leather and allied products industry, whose capacity utilisation stood at 27,5% on the back of cheap imports, mainly from China. Battery making companies, on the other hand, were the best performing with a capacity utilisation of 76,5%.
In his quest to make viable capital accessible, Finance minister Tendai Biti last week proposed a raft of measures which seek to keep the manufacturing sector afloat.
He said Treasury would channel more funds towards Dimaf and would lend money sourced from the country’s two largest institutional investors — Old Mutual and the National Social Security Authority — at a maximum of 10% interest per annum.
It still remains to be seen whether several packages introduced by Biti in the 2013 National Budget will stimulate the manufacturing sector or Bulawayo’s downslide will continue.
ZCTU predicts bleak future
THE Zimbabwe Congress of Trade Unions (ZCTU) has predicted a bleak future for Bulawayo’s industrial sector saying there is no hope for reversal in company closures.
ZCTU’s Western Region chairperson Reason Ngwenya told NewsDay that the worst was yet to come for the city’s business sector.
“It has been a horrible year for industries in the city, but as for next year it would be extremely worse,” he said.
“It’s just bleak. The trend has already been set and there is no hope of its reversal.”
Ngwenya added that in 2009, when the economic meltdown was setting in, it was far better because industries were not retrenching and closing down compared to the current scenario.
“Bulawayo is no longer viable for investment. It would be folly for a serious industrialist to inject capital,” he said.
“The market locally is nonexistent and industries that are producing are selling elsewhere.
“It is largely blamed on cheap imports.”
Ngwenya said he feared that most companies would not re-open after the December shutdown.
“As we approach the annual shutdown period, we are beginning to hear workers and some managers talking of not reopening next January.
“However, it could be a ploy to instil fear in workers so that they don’t demand bonuses. But the future is bleak.”
The government has announced several initiatives to revive industries in Bulawayo, but these have failed to take off due to lack of political will.
The Distressed Industries and Marginalised Areas Fund (Dimaf) set up by the government in October 2011 to rescue the struggling Bulawayo industries is the last such initiative.
Ngwenya said Dimaf was just a ploy to buy time.
“Simply put, the government raised false hope on reviving the city. Firms that are said to have benefited are just not visible. The identity is kept a secret which raises suspicion that not a cent was released,” added Ngwenya.
To date, CABS — which has been tasked to disburse the $40 million under Dimaf — says 17 companies from Matabeleland region have benefited.
In the years gone by, Bulawayo used to boast mass-employing firms such as Merlin, National Railways of Zimbabwe, National Blankets and Monarch, which used to produce goods both for the local and international markets.
But in the recent past, gradually firms began either closing, relocated elsewhere or scaled down operations.
Now Belmont Industrial Zone is a pale shadow of its former self, most buildings are empty with some fast taken up by religious groupings
Companies that have closed
ASCOT Clothing Company, one of the city’s leading textiles firms closed shop in October leaving 105 employees stranded.
The company had been dogged by liquidity problems which saw it failing to remit pension contributions and paying its creditors on time.
Workers approached the Zimbabwe Congress of Trade Unions seeking assistance claiming they were owed over $130 000 in wages after the managing director Doron Kirkel deserted the company more than six months ago.
The firm is estimated to owe a long list of creditors over $1 million.
Its stranded employees indicated that the company creditors include Zesa Holdings, banks, the Zimbabwe Revenue Authority and National Social Security Authority.
The Clothing Industry Pension Fund once attached the company’s machinery demanding an estimated $55 000 owed to it since 2009.
- More than 300 workers at The Ready Wholesalers trading as Belmor Clothing Manufacturers lost their jobs at the end of October due to viability problems.
Workers were given exit packages based on the number of years served.
For instance, workers who had clocked 10 years and below were given one month salary for every year served.
- Listed pharmaceutical concern MedTech Holdings
Limited closed its drug manufacturing plant in Bulawayo citing poor demand for its products.
MedTech management advised shareholders that “based on the lower-than-expected sales along with the high costs of labour and other fixed essential costs, this manufacturing business has been assessed as unviable without further capital input and a longer investment horizon”.
Other companies that have either closed or scaled down operations include Harven, a lingerie shop which had been in existence since 1952, The Ready Wholesalers trading as Belmor Clothing Manufacturers, National Blankets, Cotton Printers, Security Mills, the country’s sole manufacturer of knitting yarn, Karina, David Whitehead as well as Continental Fashions, a textile giant that had been operating in Zimbabwe for more than 48 years.