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Industry capacity utilisation stagnates... as investments drop 31%

Business
CZI President Kurai Matsheza

THE manufacturing sector’s capacity utilisation remained nearly stagnant at 56,1% owing to power outages, forex shortages and hawkish policies that translated to a 31% drop in investments to US$101 million last year.

The Confederation of Zimbabwe Industries (CZI) yesterday released its manufacturing sector survey for 2022.

The results indicated drop in investments during the period under review from US$147 million in the comparative 2021 period.

Speaking to NewsDay Business following the release of CZI’s 2022 Manufacturing Sector Survey, the confederation’s president Kurai Matsheza said capacity utilisation was basically stagnant as in 2021 the figure was 56,3%.

“If you look at our manufacturing results the theme there, I don’t know if you captured it, it says ‘Fortunes with Modest Growth’. It is a number of good things and a number of issues that are pressure points that still need attention. But, overall, at that 56,1% you can take it as a standstill position,” he said.

“And in this environment, it is a positive development, more so, when you look at the issues we were faced with towards the end of last year, which is in the last quarter, like the power issues. They really started hitting our members hard and coupled to that most of our growth or more volume comes up in the last quarter and this is where we were hit.”

As of the end of 2022, there were about 4 552 manufacturing firms with at least 10 employees in the country.

“The survey is not limited to CZI members and captures performance across the country. With a sample size of 409 manufacturing sector companies, 21% are CZI members. Five percent of the surveyed companies are listed entities representing 80% of the manufacturing listed companies,” CZI said.

“With a growing sample size each year and broad variables, the report remains the most quoted survey on the performance of the manufacturing sector in Zimbabwe and a valuable piece of analysis providing both business and policy makers with valuable insights.”

CZI found that 2022’s first and second quarters saw a reversal of the falling 2021 trend in terms of the parallel market exchange and inflation rate as the Zimbabwe dollar continued to lack critical support levels.

By mid-year, the greenback became more elusive as the parallel market premium widened.

Exchange rate and inflation stability returned during the third quarter after Treasury and the central bank introduced a slew of hawkish fiscal and monetary policies, that effectively controlled liquidity.

But, this control led to a decrease in borrowing as part of these hawkish policies included a significant rise in interest rates further affecting the sector’s ability to capitalise.

By the time the fourth quarter arrived, CZI reported intensified power outages.

“The biggest challenge now is power. For the manufacturing sector, it’s electricity,” he said.

“Without electricity, these problems are going to carry on and those who want to produce will not be able to produce adequately with the challenge of electricity. So other factors have been downgraded but if we do not address the electricity issue, I think as a country we have serious challenges.”

From those surveyed, 17% reported no change in their output, while 80% saw an increase, with the remainder declining to comment.

 

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