Zimbabwe needs to redirect investment to areas with lower capacity utilisation to lift exports, former Confederation of Zimbabwe Industries (CZI) president Joseph Kanyekanye (pictured) has said.
According to the CZI Manufacturing Sector Survey for 2017, only 15% of total manufactured goods are exported.
Kanyekanye told businessdigest the country was misdirecting investments, adding that a decline from 37% to 15% was not sustainable.
“We need to redirect policy and invest in areas that have less capacity and those are the areas that are in real need. What we actually need is a paradigm shift where we promulgate policies that encourage exports and develop a system where we compensate exporters through local RTGS so that we create more US dollars,” he said.
Although overall output volume increased by 5,5%, average weighted capacity utilisation went down 2,3 % to 45,1%.
Kanyekanye said although volumes increased, capacity utilisation had dropped owing to inefficiencies of the sector as a whole.
The survey shows that 5,5% growth in output was recorded by companies whose machinery is less than 10 years old, while companies with older machinery and equipment did not record any growth or decline.
While growth in output is positive in most sectors, it should be noted that the growth in output for non-metallic mineral products is 16% compared to average capacity utilisation decline over the same period of 24%.
Meanwhile, Kanyekanye said Statutory Instrument (SI) 64 of 2016 had done very little to stimulate exports or increasing capacity utilisation as evidenced by the survey.
Kanyekanye dispelled the long held view that the increase in capacity utilisation last year was owing to government protectionist policies such as SI 64.
The recent survey shows that all sectors were affected by low capacity utilisation, save for footwear, clothing and textiles.
“Popular but untrue, SI 64 did not increase capacity utilisation or VAT, but caused a Vat decline. Overall, VAT rose nominally by 3% implying no VAT increases traceable to SI 64. Capacity utilisation increase is in non SI 64 sector of textiles, clothing and footwear,” he said.
However, according to the survey, capacity utilisation declined despite 56% of surveyed respondents claiming SI 64 of 2016 had a positive impact on their businesses.
Overally, the results show that in 2016, 84% of raw materials were sourced locally while in 2017, 64% were sourced locally.
According to the CZI ,the decline in raw materials sourced locally points to the pressure on foreign currency requirements and the need to shift to local raw materials where possible.
The growing imbalance between the RTGS account and the underlying nostro backing the account was also cause for concern with the manufacturing sector growth being hindered by pressure from some parastatals and government institutions.