US$2bn needed to revive manufacturing: Jabangwe

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THE manufacturing sector has been facing a plethora of problems ranging from a debilitating liquidity crunch, obsolete equipment to inadequate funding for its operations. However, hope for revival of the sector has been renewed by the new government which has made turning around the economy one of its key goals. Zimbabwe Independent business reporter Kudzai Kuwaza (KK) spoke to Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe (SJ) on various issues, including the new government, funding challenges and his view on the legislative agenda set by President Emmerson Mnangagwa at the opening of the Ninth Parliament this week:

KK: What are your expectations for the recently appointed Cabinet?

SJ: We are quite happy with the announcement of a new cabinet. The vision has already been given by his Excellency, which is to make Zimbabwe a middle-income economy by 2030. From our own calculations, it requires a 9% growth rate per annum in order to achieve this. This requires that we accelerate the pace at which the economy is currently operating. Currently the economy for 2018 is expected to range between 4,5 and 6%. What we need is 9%. What this means is that the appointed Cabinet must accelerate all issues to do with the ease of doing business and issues of investment promotion to ensure that they speed up economic growth.

KK: What is your view of the legislative agenda set by President Emmerson Mnangagwa when he opened parliament this week, particularly around issues such as ease of doing business and investment promotion?

SJ: With regards to the legislative agenda set up by his Excellency, I believe this is in line with the vision and what we need to do right now. Improving the ease of doing business is critical to any improvement of the economy. If the hindrances that we have right now are not attended, you will find that we will not get the investment that we want and even those who are locally invested will not expand their operations.

We need to make it as smooth and sweet as possible to do business in Zimbabwe. This will support the other key thing, which is investment promotion because as a country we have a lot to offer to any investor, but if the conditions for exploiting such opportunities are very difficult you will find that investors will bypass us and go elsewhere and the investments that we have will not grow, but remain as they are.

We would like a business environment that promotes, particularly the growth of local capital. We need to have a balance between local capital and foreign capital to create a stable business environment. Certainly, the thrust that has been set by his Excellency is appropriate and just awaits us to deliver because government cannot do it on its own.

KK: There has been growing concern over the increase in the price of goods. What has triggered this?

SJ: On prices we need to separate the two groups of commodities. The 16 monitored commodities are within 5% of January prices except for meat, which has gone up by 14% and we were trying to find out why this was so.

We were informed that it has to do with the foot and mouth disease which has been spreading. The Consumer Council of Zimbabwe basket confirms that the basket moved up by only US$8, which means the prices of basic commodities have been stable. The prices that have gone up significantly are those for finished imported goods, which have gone up by levels that have shaken the black market rate. These ones are more of luxuries and we are really not concerned about them because there are local substitutes for some of these products. We would like the market to concentrate on local products and build the capacity of local industry.

KK: The recently appointed Finance minister, Mthuli Ncube, has spoken about the need to get rid of bond notes. How will this help industry?

SJ: With regards to bond notes, they have always had some controversy around them, with people having very different opinions and as industry, they affected confidence negatively. On the other hand, it was widely used for small transactions such as bread, eggs and tomatoes. We need to have a holistic plan which takes everything into consideration if we are to remove them. Otherwise if we do not have a proper plan, it could have unintended consequences. Bond notes might be causing problems in one area, but covering a gap in another area. We need well-researched positions.

KK: What is the expected capacity utilisation for the manufacturing sector this year?

SJ: With regards to capacity utilisation, we expect it to be between 50 and 60% from a position of 45% despite challenges companies have been reporting on. This is because performance in terms of volumes has gone up for our members. We will be measuring capacity utilisation in this last quarter of the year.

We will be measuring capacity utilisation in the last quarter. We expect the results of the state of the manufacturing sector, which will measure capacity utilisation and other issues affecting the manufacturing sector, by November.

KK: How much, in your estimation, will be needed to revive the manufacturing sector?

SJ: I think we need about US$2 billion. This will give us a very good start. It will be funding that will go towards working capital and it will also go towards companies that need to import equipment for purposes of retooling.

KK: What has been the level of the company closures in 2018?

SJ: In 2018, we have not had many company closures. The problem for business has been the issue of demand and keeping up with that demand. In 2018, we saw the reduction of company closures. Despite the conditions being tough, the manufacturing sector has managed to operate.

KK: How successful has industry been in accessing lines of credit from both local and foreign lenders?

SJ: With regards to accessing lines of credit, there has been some success. Afrieximbank has been supportive and the African Development Bank came up with a US$25 million facility at the backend of last year.

But this is just a start. We need improvement in the issues and conditions relating to access to capital so that it is easy for all companies to access capital. This is one of the things that government will need to work on very hard to ensure that we can access lines of capital in order to grow our business.

KK: The CZI held a meeting with various stakeholders this week. What were the issues you discussed?

SJ: We held a meeting to get a consensus on the import to the monetary policy to be presented soon. We agreed that government needs to live within its means. Without fiscal discipline we will continue digging ourselves into a hole. We also discussed the need for the country to increase production. There were proposals which were tabled, but I cannot go into details about those.

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