Capacity utilisation set to rise to 60% –– Mashakada

He said government would this year prioritise revival of distressed industries and increase capacity utilisation from the current 57,2% to 60% by year end 2012. 

According to the Confederation of Zimbabwe Industries (CZI), capacity utilisation rose to 57,2% by the end of the first half of 2011, from 43,7% recorded in the same period in the previous year.

Mashakada said his ministry would this year finalise outstanding Bilateral Investment Promotion and Protection Agreements (Bippa), a move he said would facilitate the release of lines of credit and investment.

He said government would  follow  up  and ensure the finalisation of  the Bippa between Zimbabwe and Botswana,  which would see  more than 500 million pula (US$70 million)  being  injected into the economy.

This, he said, would go a significant way towards easing the liquidity crisis in the economy and avail more credit to companies in manufacturing, mining and agriculture. The ratified trade pact between Zimbabwe and South Africa would help the country to access US$15 million lines of credit South Africa pledged to Zimbabwe and the restoration of a R2,65 billion facility which was scrapped at the height of the economic instability, he said.

Economic analyst Eric Bloch said it was possible for Zimbabwean industry to achieve  60% or even 80% capacity utilisation.

Bloch said 60% capacity utilisation could be only be achieved if the prevailing liquidity challenges in the market were dealt with, giving industry the opportunity to source working capital.

“Almost all industries are presently greatly constrained by gross inadequacy of requisite finance, their resources having been considerably eroded by the 2008 hyperinflation, and the subsequent demonetisation of Zimbabwe’s currency,” Bloch said.

He called on the government to reinstate meaningful export incentives and to facilitate enhanced export volumes to substantial markets within Sadc and Comesa.

He said there was also need to diminish the prevailing pronounced conflicts between employers and labour to maximise productivity.

Mashakada said rebranding Zimbabwe into a preferred investment destination in the region was critical, adding government would this year conduct Diaspora engagements and road shows to campaign for foreign direct investment, which was critical for the full resuscitation of the economy.

The targeted increase in capacity utilisation might not be achieved by a myriad of challenges facing the economy. While investment projects were approved, the projects had not taken off and continue to be hampered by the country’s high economic and political risk.

High costs of production, coupled with low levels of capacity utilisation and inferior product quality had largely rendered Zimbabwe’s manufactured goods uncompetitive, both on the regional and international markets.

The sector had also suffered from the influx of cheap imports coming from neighbouring countries like South Africa and Asia which had rendered locally manufactured goods uncompetitive.

The situation was also worsened by low demand for domestic products because they were highly priced.

Lack of fiscal space and debt overhang continued to barricade economic growth and heavily weighed down increase in capacity utilisation, Mashakada said.An economic cluster compromising of 11 ministries was set to revise, monitor and evaluate the Medium Term Plan (MTP) implementation process through economic management seminars, updating of the macroeconomic framework and economic research in consultation with all line ministries.

Mashakada said through the implementation of the MTP he hoped to improve the country’s low 0,376 Human Development Index (HDI) value by at least 18% to match the average recorded 0,463 in sub saharan Africa.

HDI is a composite scale to comparatively measure life expectancy, adult literacy rate, mean years of schooling, and income measured by real gross domestic product per capita.

Mashakada was speaking at the launch the United Nations Development Fund (UNDP),  2011 Human development, saying the country’s  poor HDI performance  would be  addressed  by  the full implementation of  the MTP.

According to the UNDP report, Zimbabwe was ranked 173 out of 187 countries despite the 7% increase in index value to 0,376 from 0,349 recorded between 2009 and 2011. The country was therefore grouped in the low human development category which was marked at less than 0,522 in index value.
Zimbabwe, between the period of 1990 and 2009, recorded 18% decrease in HDI value, going down to 0,349 from 0,425.

HDI performance in Zimbabwe, according to the UNDP report, was 39% lower than Libya’s 0,760, the highest HDI value in Africa while it is trailing 57% behind Norway, with the highest recorded at 0,943.

Mashakada, who admitted that country’s HDI performance was poor, said it has been on rebound of late, helped by improvements in per capita income largely driven by registered economic growth of 7% on average since dollarisation.

The minister said implementation of the MTP would see the country’s HDI value rising back to that of the 1990s where it was recorded above 0,522 and grouped in the medium human development category.

The MTP, among other objectives, seeks to achieve broad-based economic growth and achieve a GDP of 9 billion by 2015.

The plan is expected to bolster the prevailing stability, achieve an average economic growth rate of 7, 1% per annum and single digit inflation during the five years of the plan.

The MTP aims at a 6 % employment creation per annum, a current account deficit of not more than 5% of GDP by 2015 and sustained poverty reduction in line with the United Nations’ millennium development goals targets among other things.

The overall goal of the plan is to transform the fortunes of the country’s economy and raising the economy to a US$100 billion by 2030.

The implementation of the MTP is however still mired in a myriad of challenges, including the incessant political bickering and uncertain calls for an early election in 2012.

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