THE recent report by the Confederation of Zimbabwe Industries shows that manufactured output volume increased 5,5% this year despite a 2,3% drop in capacity utilisation to 45,1%. Last year capacity utilisation was 47,4%.
What is instructive in the report is that growth in output was recorded by companies whose machinery is less than 10 years old. This means the majority of companies in the sector are still stuck with antiquated machinery, which has become a burden, as it increases the cost of production, thereby making local products uncompetitive.
Obsolete machinery and breakdowns, alongside cost and shortages of raw materials, low local demand, foreign currency shortages and competition from imports, were recorded as constraints to the growth in capacity utilisation.
These pointers should have jolted authorities by now. But then, this government is insensitive to the plight of industry and is good only when rolling out populist policies such as price cuts at the expense of the economy.
Industry’s cries for funding to retool have not been heeded. What has been made available is short-term financing under the distressed marginalised areas fund, which did not achieve the desired results.
Government’s coffers are dry but this does not mean there is nothing it can do to support the manufacturing sector. Putting in place favourable policies is a low-hanging fruit. It does not cost money to realign the Indigenisation law according to President Robert Mugabe’s clarification, after his nephew then Indigenisation minister Patrick Zhuwao clashed with then Finance minister Patrick Chinamasa resulting in a flight of investors out of Zimbabwe last year. It does not cost money to run an efficient system.
Government can begin the process of helping the manufacturing sector by weaning off loss-making parastatals and State enterprises that are draining the fiscus. Only last week chief secretary to the President and Cabinet Misheck Sibanda revealed that audited financial statements for 93 State enterprises in 2016 showed an overall loss of $270 million by 38 of the surveyed commercial entities.
He said 70% of the 93 entities were technically in solvent or illiquid, presenting an actual or potential drain upon an already overburdened fiscus. The common ailment afflicting the State enterprises was weak corporate governance.
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Government has in the past intervened by introducing restrictions such as Statutory Instrument (SI) 64 of 2016 to protect local industries. SI64 restricts the importation of 43 products.
Importations of such products can only be done when one is licenced but after satisfying the ministry of Industry and Commerce why those products should be imported since they have local equivalents.
But, restrictions on their own are inadequate in the wake of archaic machines and foreign currency shortages. Due to the afore-mentioned constraints SI64 has failed to deliver the required results, as shown from the decline in capacity utilisation despite its praising by authorities.
A holistic approach is, therefore, required to address the concerns of the manufacturing sector for it to contribute to the growth of the economy. The sector has been projected to contribute 15% to exports this year. In 2013, the manufacturing sector contributed 23% to total exports declining to 24% in 2014, 19% in 2015 and 15% last year. We urge Industry and Commerce minister Mike Bimha to work towards the resuscitation of critical sectors to kick-start the economy.
