LOW capacity utilisation, working capital constraints and the government’s indigenisation policy, among other factors, have caused the de-industrialisation of Bulawayo, a study conducted by the National University of Science and Technology (Nust) reveals.
The survey was conducted by Nust Technopark director, Eli Mtetwa and students.
The study, commissioned in September 2011, says more than 73% of interviewed industrial companies’ capacity utilisation was low with most operating in “survival mode”.
The objective of the study was to investigate industrial manufacturing level and state of the business environment in Bulawayo in the 1960s to 1980, 1980 to 2000 and 2000 to date.
According to the study, relocation of industry dates back to pre-Independence period and accelerated after 1980 because certain economic and political realities favoured relocation to Harare.
The companies, according to the study, attributed low levels of capacity utilisation to loss of skilled labour, a shrinking market and obsolete equipment.
Out of the companies surveyed, the 40% that experienced high labour turnover between 2000 and 2009 were metalworking and mining-related industries.
“The relocation of businesses from Bulawayo has been reducing the customer base of industrial manufacturers over the years,” the study shows. “The supplier base for industry has similarly been eroded”.
The study also noted purchasing power of the Bulawayo population was very low, adding poverty levels were very high.
Earlier surveys on poverty before the 2006-09 economic meltdown found poverty levels were much higher in Bulawayo compared to other urban centres around Zimbabwe.
However, obsolete equipment and low capacity utilisation resulted in high unit cost of production, low profit, outright losses and general uncompetetiveness, the study says.
The study also found that many companies were either cash-strapped or desperately needed operating capital and could not meet wage and utility charges.
“The banking sector is experiencing its own liquidity problems and therefore not in a position to aid anyone. Even in instances where a bank lends money to help meet operating capital requirements, the lending periods are short to the point of harassing,” the study says.
“In addition, the interest rates are high to the point of making it not feasible to earn a profit.”
Raw materials such as agricultural produce and steel products — once available in the country — are now scarce, forcing companies to import.
This, the study notes, also increased operating costs. Erratic power supply had also contributed to the problems facing companies in the country’s second largest city.
High cost of utilities — electricity, water and rates — did not help the situation.
“On the footsteps of the meltdown period, a significant number of companies were resuscitated thanks to the injection of fresh capital by their parent companies overseas or in South Africa,” the study says.
“In the face of the government indigenisation drive, the external parent companies concerned have since backed away from investing in their Zimbabwe entities and hence those companies are on the verge of collapse.”
Competition from cheap imports had slowed down turnover, the study indicates.