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Local firms in dire straits

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CAPACITY utilisation in Zimbabwe’s manufacturing sector has plunged to 44,2% from 57,2% recorded last year amid warnings by industry that a fresh crisis triggered by capital constraints is looming.

Report by Bernard Mpofu  Chief Business Reporter

According to the 2012 manufacturing sector survey report released by the Confederation of Zimbabwe Industries (CZI) yesterday, performance of local firms dipped for the first time since dollarisation in 2009 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%.

CZI chief economist, Loraine Chikanya, said the manufacturing sector that was expected to grow by 6% this year was in a dire state.

“The manufacturing sector is in a crisis and to some extent this has resulted in company closures. The prevailing status quo cannot be maintained,” Chikanya said.

“The global capacity utilisation for the manufacturing sector for 2012 is 44,2%.”

From the respondents, only 46,5% recorded capacity utilisation of above 50%, with a total of four firms recording operating at 100%.

The average capacity utilisation of 44,2% would imply a decline of 12,3 percentage points from last year’s average of 57,2%.

However, a lateral comparison in this case is not ideal due to the increase in scope and coverage of the survey.

Speaking at the launch of the survey, Industry and Commerce minister Welshman Ncube said capital constraints was the major impediment stifling growth of the manufacturing sector.

“We think that the most critical factor which is impacting the manufacturing sector is the unavailability of money,” he said.
“The challenge is how to make money available at relatively low rates.

“There is no money around.”

The survey comes barely a week after Finance minister Tendai Biti revised downwards economic growth projections to 4% from 5,6% as a result of the poor performance of the agricultural sector and underperformance of diamond revenue.

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