BY SHAME MAKOSHORI
ZIMBABWE’S industries have emerged from the crossfire of Covid-19-induced lockdowns and forex shortages to extend a bounce-back registered since the second quarter of this year, central bank chief John Mangudya has revealed.
The Reserve Bank of Zimbabwe (RBZ) governor said on Friday that after expanding capacity utilisation to 56% during the second quarter, from 47% in December 2020, the recovery impetus has gained traction, with some firms reaching 95% capacity.
His disclosures represented one of the quickest bounce-backs in Southern Africa, a region hardest hit by the pandemic.
As the pandemic ripped through industries most of last year, business executives had projected a big slowdown of up to 12% in Zimbabwe, followed by a painfully slow recovery in the aftermath of the Covid-19 pandemic, with industries not expected to swing back to 2019 output levels until late next year, or beyond.
Despite the negative impact of Covid-19 and extensive supply chain disruptions on the global markets that threw markets into complete disarray, Mangudya told a highly subscribed monetary policy statement (MPS) review webinar organised by the Zimbabwe Independent that behind the frustrations sparked by multiple crises, something positive took place in the economy, although the ground remained shaky.
“We have witnessed a decrease in inflation, which is an area we are focusing on because once inflation goes down, we improve the value of our currency,” Mangudya said.
“We have also witnessed an increase in capacity utilisation. Figures from the Confederation of Zimbabwe Industries (CZI) indicate that they are anticipating growth to 61% in capacity utilisation by the end of this year. Some companies are already at 85%, others are at 95% capacity utilisation depending on which entities you are talking about. So the average of 61% is achievable.
“It doesn’t mean that we won’t face obstacles, even a plane sometimes faces turbulence. But you need to remain on course to go where you are going. Don’t forget your destination. Our destination is lower inflation and we want to remain on that course,” he added, noting that financial statements from listed companies were confirming the recovery.
Capacity utilisation, a measurement of how much of a given firm’s installed production capacity is being utilised, was estimated at 47% at the end of 2020.
The RBZ chief said plummeting inflation rates and improved access to United States dollars, through his under-fire foreign currency auction system, were driving industrial recovery.
His positive sentiment resonated with an optimistic tone struck by the CZI following a poll of 400 firms, including the big quoted outfits in May, which became the first independent study to indicate that Zimbabwe could rebound this year.
The CZI said 86% of its respondents gave the economy a big chance to recover, although it said industrialists raised red flags over potential downside risks.
Still, the solution to hurdles confronting companies lies in the RBZ’s ability to tackle roadblocks affecting the foreign currency auction system, which has recently been overwhelmed by firms turning away from the extortionist parallel market. But as they shift to the official market, many reach a dead-end, suffering prolonged delays of up to two months before receiving allotted funds thereby crippling operations. This has been made worse by a Zimbabwean dollar which has surrendered its purchasing power by significant margins.
As the parallel market exchange rate, however, rampaged in the past few weeks due to spiralling demand, the official forex auction market has been hamstrung by the shortage of liquidity to allot funding, pushing firms to troop back to the alternative market for their requirements.
Last week, the Zimbabwe National Chamber of Commerce estimated that the parallel market was now supplying foreign currency to 80% of corporations and individuals.
Analysts see this as the beginning of more troubles ahead, as inflation, which fell to 56% in July from 106% in June, could start piling pressure on the economy again.
Rolling power blackouts have also returned to haunt industries and consumers in the past few weeks.