THE government has embarked on a project to support companies to venture into toll manufacturing to avoid collapse and has so far identified 18 firms for a
start, a report compiled by the Ministry of Industry and International Trade has revealed.
The report shows that 72% of manufacturing companies in Zimbabwe are operating below capacity.
Titled Report of the Taskforce on Import Substitution, Value Addition and Toll Manufacturing, the report was compiled by the permanent secretary in the Ministry of Industry and International Trade, Retired Colonel Christian Katsande.
The report was presented at a National Economic Development Priority Programme (NEDPP) report back meeting last Friday.
The meeting was organised by the Zimbabwe National Chamber of Commerce (ZNCC) in Bulawayo last week.
The concept of toll manufacturing, according to the report, involves a company outsourcing or subcontracting a manufacturing function to a third party within or outside the country.
The manufacturer will then perform the contracted job for a fee.
“Already we have 18 companies that have been approved for toll manufacturing. Of these, nine companies have started the programme with the remainder scheduled to commence production very soon,” the report said.
The report reveals that the manufacturing sector has been declining drastically and that 72% of companies are operating at below 70% of capacity.
“Available statistics indicate that the manufacturing sector has been declining drastically. Between 2004 and 2005 only 13% of the manufacturing sector was operating above 75% of installed capacity,” the report says.
“Currently about 40% of the manufacturing sector is operating between 50 and 70% while 32% of the sector is operating below 30% of capacity,” it says.
Zimbabwe’s manufacturing sector has been weighed down by a myriad problems ranging from shortages of raw materials to a foreign currency squeeze.
Despite efforts by government to revive falling companies through the Distressed Companies Fund, not much has been achieved as companies continue on a downward trend.
“It is hoped therefore that toll manufacturing will enable growth of the manufacturing sector, increase capacity utilisation, save jobs and earn foreign currency,” the report said.
“Opportunities exist for our companies to enter into toll manufacturing agreements with internal and third parties because we do possess the requisite skills base … This can also be an opportunity for technology transfer from the customer to our companies,” the report says.
The main challenges facing the initiative, the report said, was old and obsolete machinery.
“Toll manufacturing faces operational challenges that need to be overcome for successful implementation of the programme. Among the challenges that need be addressed are the state of the plant and machinery in the companies. Some of our companies are operating with antiquated machinery or using inefficient technology,” reads the report.
The largest manufacturing companies that include Sable Chemicals, Dunlop, Ziscosteel, and Craster International are facing collapse due to viability problems.