Local manufacturing sector capacity utilisation increases

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LOCAL manufacturing sector capacity utilisation increased by 18% to 47,4% this year, but experts say this is largely due to distortions stemming from the closure of hundreds of companies that are no longer considered in a nationwide survey.

By Fidelity Mhlanga

Zimbabwe National Chamber of Commerce chief executive Christopher Mugaga said the Conference of Zimbabwe Industries (CZI) survey should take into account companies that shut down.

“If you look at the survey, I think it’s a positive result, but we really can’t overlook concerns from stakeholders to look at the quality of information captured to a certain extent. I think there were a number of questions asked on the companies which had closed down and those operating at 0%. I think de-industrialisation is certainly a fact in this country. If we are looking at figures here, they looking at capacity utilisation vis a vis companies which are operating but the flaws of taking such an approach is this does not reflect the actual economy,” he said.

Despite an increase in capacity utilisation from 34,3% to 47,4%, industry remains subdued by corruption, policy instability, lack of access to cheap finance, competition from imports and low demand for domestic products.

According to the CZI 2016 survey report released on Wednesday, companies still operating under difficult circumstances.

“The five hurdles when importing materials, according to the survey, were corruption at the border, import licencing requirements, Zimbabwe Revenue Authority system inefficiency, burdensome import procedures and delays caused by domestic transportation,” said CZI senior economist Dephine Mazambani Mutafera.

The CZI survey revealed that 21,7% companies were affected by low demand for domestic products, 14,2% liquidity crisis, 12,8% competition from imports competition and 11,4% from local producers drawbacks .

The survey further revealed that 10,3% complained about the current economic environment and 4,6% decried the high cost of doing business.

“This conclusion is supported by the fact that 77,1% of respondents rated policy instability as negative or very negative for the economy. In addition, 73% feel that the government is not improving in private-public dialogue consultation with the private sector to address economic challenges. 60% of the respondents do not know of any public-private dialogues or consultations conducted by government in the past 24 months to address economic challenges,” Muzambani Mutafera said.

Capacity utilisation in Harare averages 48,3%, Bulawayo 44,3%, Manicaland 43% and Midlands 33,3%.

The CZI survey says industry equipment had obsolete equipment aged 20 years and above.

Reserve Bank of Zimbabwe governor John Mangudya said re-engagement process was the only that can open avenues for cheap access to finance.

“Capacity is a measure of index, so we are happy this is a movement from 34% to 48%, is a great improvement. Access to finance for development is difficult. If you look at industries most of the equipment is very old. We need long term finance and it can’t come from local banks. That’s why we are engaging to get funding from African Development Bank, International Finance Corporation, European Investment Bank, so that long term funding required by the industry can only come not internally but from outside,” he said.

Sector capacity utilisation for metal products stood at 37,5%, non-metallic mineral product was 57,5%, paper, printing and packaging was pegged at 52,9%, transport equipment was 45%,wood and furniture 57,8% and other manufacturing is 43%.

“The weighted capacity utilisation of 47,4% would imply an increase of 13,1 percentage points from last year’s weighted of 34,3%. There was an increase in production by companies whose products are under Statutory Instrument 64,” said Matafera.

Sectors that largely contributed to the increase were foodstuffs; drinks, tobacco and beverages,wood and furniture as well as paper, printing and packaging.

Small to Medium Enterprises recorded an average capacity utilisation of 48% while large corporates recorded 46%.
On infrastructure problems, 23% of the respondents said they were affected by power shortages, 19% were impeded by rail networks linking the ports, and 15% were crippled by poor road networks with 11% saying they were affected by poor road infrastructure.

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