Revisit Indigenisation Act to save industry

via Revisit Indigenisation Act to save industry — CZI – The Zimbabwe Independent by Taurai Mangudhla October 4, 2013

ZIMBABWE should change its land tenure system as well as revisit the Indigenisation Act in order to save industry, former CZI president Joseph Kanyekanye said.

Speaking at a Confederation of Zimbabwe Industries (CZI) 2013 Manufacturing Sector Survey report this week, Kanyekanye said government needs to address problems bedeviling the agriculture sector in respect of land title and compensation to dislocated commercial farmers and enable recovery of the industry.

“There are people who believe they should be paid for land and we should do that. I think over the years capitalism has thrived on paying for things and if we don’t and try to reverse that we will have a problem,” said Kanyekanye who is also Allied Timbers CEO.

“Some of us believe in indigenisation in terms of production and not equity as in the case with other countries and Mozambique is doing it,” Kanyekanye said.

“I think we need a fundamental change and the other thing is to do with corruption.”

Kanyekanye’s statements were in line with industry sentiments as the country’s manufacturing sector lost steam in 2013 due to a number of constraints, registering 39, 6% average capacity utilisation in the period under review, 5, 3% points down from 2012’s 44,9%.Industry and Commerce minister Mike Bimha quickly assured industry of recovery, saying government was committed to improving the business environment.

“The good news is that a lot of factors are within our control if we work together as public and private sector and next year we can see the situation improving,” Bimha said.

According to the survey, working capital constraints, utilities, in particular power shortages, water shortages and power costs, ageing equipments and machine breakdowns as well as low domestic demand are the major factors behind the low capacity utilisation and a general bad business environment in the country.

CZI said the majority of respondents called for the government to put in place policies that protect local industry with concerns the current economic environment is no longer conducive for businesses to thrive.

The industry body said the perceived current state of economic uncertainty as well as the period of political uncertainty leading up to the elections have hampered investor confidence at a time when industry is in need of financial support.

“Of the total respondents, only 40% had carried out any capital investment and this was mainly for equipment and machinery, with only 5% of this money coming from Foreign Direct Investment.”

In the report, CZI said the global capacity utilisation for the manufacturing sector for 2013 is 39,6%. From the respondents, only 35,7% recorded capacity utilisations of above 50%, with only two firms recording capacity utilisation of 100%.

In terms of subsectors, CZI chief economist Lorraine Chikanya said the pharmaceutical was hit the hardest with its capacity utilisation plunging to 20% compared to 58% in the prior year.

The car assemblers and construction sectors also slid from 30,3 % in 2012 to 13, 1% in 2013 and 59,5% in 2012 and 44,1% in 2013 respectively.

Significant growth was registered in the bakery sector from 40% capacity utilisation in 2013 to 82,5% in the period under review and grain millers from 30% to 50% capacity utilisation in 2012 and 2013 respectively.

In terms of whether business viability has improved over the past year, 48% indicated that business has not improved at all and has actually been declining, 16% recorded a slight increase, with only 7% record a significant improvement in business viability.

The industry body said on total turnover, manufacturing export sales increased from 15% recorded last year to 20% of total turnover with Zambia remaining the top export destination for manufactured products with 31% of the manufacturing share of exports.

South Africa’s market share has increased from 12 to 18%.

“In terms of competition from imported products, South Africa tops the list of competing imported products with 85% of respondents indicating that they compete with South African products while 67% of the competing products are from China,” said CZI.

The survey results indicate that on average, production for local consumption is 80% compared to 85% last year, while the remainder is for the foreign market in what CZI says is an indication of improvement in exports by the manufacturing sector.