The decline in capacity utilisation to 34,3% in 2015 is a reflection of the state of the economy, analysts have said, warning that the trend will persist.
BY TARISAI MANDIZHA
According to the Confederation of Zimbabwe Industries (CZI), capacity utilisation declined to 34,3% from 36,5% in 2014.
Capacity utilisation for the manufacturing sector took off in 2009 at around 10% and it rose to 57,2% in 2011.
Buy Zimbabwe chief economist, Kipson Gundani said the decline mirrors the state of the economy, adding that the only way out of this situation was the injection of new money into the economy.
“This is just confirming reality, companies are suffering and this is shown by the continued decline in capacity utilisation,” he said.
“If we look at capacity utilisation, in 2009 it was averaging 57% and has been on a downward trend. In 2013 capacity utilisation was at 39,6%, 36,5% last year, further declining to 34,3% . The decline in capacity utilisation and the rate at which it is declining shows the economy has reached a plateau.”
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Zimbabwe National Chamber of Commerce chief executive officer, Takunda Mugaga said the reversal was a reflection of the decline in capacity to create employment and exports, as the manufacturing sector is one of the major exporters in the country.
“The decline in capacity utilisation is a sign, showing how the economy is declining, and the manufacturing sector is one of the important sectors of the economy. This also displays that the decline in capacity utilisation shows decline in capacity to create jobs, decline in capacity to export as the manufacturing sector is the major exporter,” he said.
CZI attributed the decline in capacity utilisation to capital constraints and antiquated machinery.
“The weighted capacity utilisation of 34,3% would imply a decline of 2,2 percentage points from last year’s weighted of 36,5%. Of the respondents, 39% said they were operating at levels above 49%, while the remainder said they were operating at levels below 49%. On average, small companies of between five and 19 employees, are operating at 26% capacity utilisation, while medium companies, between 20 and 99 employees, are operating at 36,1%. The larger firms of 100 and more employees are operating at 43,1%,” CZI said.
“Competition from cheap imports, unavailability of funds for retooling, low consumer demand, high production costs and lack of long-term funding have adversely affected the manufacturing sector.”
The use of the multi-currency regime has been credited with reviving capacity utilisation in the manufacturing sector.
However, the sector is still stuck with antiquated machinery and cannot access long-term capital for retooling.
