ZIMBABWE’S manufacturing sector capacity utilisation dropped by 2,3 percentage points to 45,1% in 2017 from 47,4% last year weighed down by cost and shortage of raw materials, low local demand and foreign currency shortages.
BY FIDELITY MHLANGA
The decline was also attributed to competition from imports and antiquated machinery and breakdowns, according to a state of industry report released yesterday.
Presenting the 2017 manufacturing sector survey, Confederation of Zimbabwe Industries (CZI) chief economist, Daphine Mazambani said the economy was still way off the mark in terms of desired levels of industrialisation, as it was grappling with fiscal imbalance, depressed private sector and mismatch between money in real time gross settlement (RTGS) accounts and underlying nostro accounts.
“Some recovery has been witnessed since import restrictions were imposed last year through policies like SI (Statutory Instrument) 64. However, the economy is still way off the mark in terms of the desired and deserved levels of industrialisation. We reiterate and believe that the key priority issues that need to be worked on at macro level include a pervasive lack of confidence in the economy that is hurting new investment,” she said.
Mazambani said the government was spending money it does not have, while the uncompetitive and depressed private sector, imbalance between money in the RTGS accounts and underlying nostros and significant forex shortage were negatively affecting importation of critical raw materials.
The decline in the capacity utilisation comes as the country has enacted SI 64 of 2016 to regulate the importation of certain goods into the country.
Capacity utilisation is the percentage of the firm’s total possible production capacity that is actually being used. It refers to the relationship between actual output with the installed equipment, and the potential output, which can be produced with it.
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Industrial capacity utilisation reached its peak at 57,2% in 2011, before sliding to 44,2% in 2012, 39,6% in 2013, 36,3 % in 2014 and 34,3% in 2015.
The survey revealed that manufactured output volume grew by 5,5%, with growth in output recorded by companies, whose machinery is less than 10 years old.
“Capacity utilisation has declined despite 56% of the respondents indicating that SI64 of 2016 has had positive impact on their businesses. While other measures are being put in place, other challenges are arising. The major constraint this year was cost and shortage of raw materials,” Mazambani said.
“This is of concern, as it jumped from being lowly ranked in the past survey results to being the highest ranked. Another factor, very closely related to raw material constraints, is the current foreign currency shortages, which is affecting raw material availability.”
The survey unearthed that 60% of the large firms use machinery older than 20 years, compared to 36% for medium sized firms and 31% for small firms.
“From the results, 26,8% of respondents only face competition from domestic firms, while 11,4% only face competition from foreign companies. Sixty percent of companies face competition from both domestic and foreign companies. In the last four years, we have seen Zambia emerging, as a manufacturing hub as evidenced by the percentage of companies indicating they face competition from products coming from that market,” Mazambani said.
According to the survey, which ended on September 14, the majority of companies highlighted the need for improved distribution channels, citing the need to improve road and resuscitate the rail sector. They also noted that industry needed to be improved.
More than 250 questionnaires were sent to respondents in the manufacturing sector. Companies were drawn from the four CZI regional chambers namely Mashonaland, Manicaland, Matabeleland and Midlands. These include both CZI members and non-members
