ZIMBABWE’S volatile macro-economic environment, characterised by a depreciating local currency, acute power shortages and expensive raw materials, has raised the spectre of imminent job losses and scaling down of operations across the country’s manufacturing sector.
This comes after leading footwear manufacturer Bata Shoe Company announced that it will be retrenching 10% of its workforce, joining a long list of companies instituting furloughs induced by the deteriorating operating environment.
In the clothing and retail sector, Edgars Stores Limited, among other garment manufacturers, has put measures in place to cushion itself from mushrooming boutiques selling smuggled cheap imports.
Commenting on the myriad of challenges buffeting Zimbabwe’s manufacturing sector, Confederation of Zimbabwe Industries president Kurai Matsheza said cheap imports across the country’s economy had rendered a number of local companies uncompetitive.
“Companies like Bata and Edgars are struggling because of people selling second-hand shoes and clothes and this has impacted their operations,” he said.
“The reduction in the country’s cattle herd has impacted local leather production making it difficult for big companies like Bata to operate. This is the reason why they are downsizing their workforce.”
Zimbabwe National Chamber of Commerce chief executive officer Christopher Mugaga concurred that the proliferation of informal traders was adversely affecting established companies in the formal sector.
“The operational environment has been hard during the second half of the year. This is due to several challenges," he said.
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“Informal traders are selling everywhere and that is pushing big companies out of business. Competition for foreign products is another challenge. Since we opened our borders, it is hard to compete with foreign products.
“Formal companies are also sitting on a debt they acquired when the currency was stabilising. So, their balance sheets have foreign currency exposure debt hence, the reason why most companies are retrenching.”
Association for Business in Zimbabwe chief executive officer Victor Nyoni said the acute foreign currency shortages, coupled with currency volatilities in the macro-economic environment were weighing down on the operations of local firms.
These challenges, Nyoni added, were more pronounced in the tourism industry.
“Stocking companies are not competitive, because the US dollar is making us an expensive destination. When tourists come here, they would rather go and spend their money in Zambia because our hotels and food are expensive," he said.
“Our currency can be sustained by two things, proper behaviour and production. We need to produce more to sustain our currency.”
Truworths chief executive officer and executive director Bekithemba Ndebele recently told the Independent that the outlook for 2024 is not great until the government addresses issues of smuggling and dumping.
“We need to fix this economy. Our business relies on order in the main trading central business districts that do not allow informal traders to trade dumped items at no overhead cost on our doorsteps,” he said.
“Our business growth relies on new employment growth from graduates from colleges and universities. That’s what keeps growth going.”
Ndebele added: “We’ve lost over 90% of the formal manufacturers. And all the shoes, all the big factories are gone. They don’t exist anymore. In terms of ladies’ wear, we are only left with one manufacturer.
“The rest now are just small cottages, people with their sewing machines. If I want Denim today, I have to import it. If I want a men’s shirt today, I have to import it. If I want men’s trousers, I have to import it. If I want the men’s suit, I have to import it.”
Zimbabwe Congress of Trade Unions secretary general Japhet Moyo said:
“It is difficult because we as labour, we are selling our labour to business people. So if someone tells us that the job loss is going to be coming in 2024, it's bad news for us. It's bad news for labour,” he said.
“We expect the economy to grow jobs rather than to shed the jobs. And this is a contradiction to what the minister (Finance minister Mthuli Ncube) is actually talking about. The government is telling us that there will be an economic growth in 2024. We see some sort of contradiction on what the government says and what the business is telling us."
Moyo said there was a need for the government and private sector to sit down and discuss how best they can mitigate these challenges.
“(We have the) Tripartite Negotiating Forum (TNF), where business, organised labour and government meet, why are these things not brought forward for discussion?” he said.
“So I advise that the businesses are supposed to bring those issues to the TNF.”