Source: Industry challenges ED – The Standard May 6, 2018
LOCAL industry says government should create a conducive environment for the sector to up capacity utilisation.
BY MTHANDAZO NYONI
The call was in response to President Emmerson Mnangagwa, who recently exhorted “all players in industry and commerce to produce quality products, increase industrial capacity utilisation, think outside the box, innovate and use technology as well as appropriate solutions to reduce productivity costs and enhance product competitiveness”.
Association for Business in Zimbabwe CEO Victor Nyoni disclosed to Standardbusiness the constraints faced by business related to the macro-economic environment and government policies.
“Businesses are in a crisis and cannot just increase capacity utilisation on a word of encouragement no matter how well meaning it is,” he said.
Nyoni said business and government had to come together for a solution on how nostro accounts could be funded in order to finance importation of raw materials that would support local production.
He said this would help build up Zimbabwe’s exports, adding that production of quality products was an outcome of a functioning economy.
He said the call by Mnangagwa was encouraging, but it needed to go beyond rhetoric.
“Government has to be careful that it does not get trapped in mantras without walking the talk,” Nyoni said.
“As businesses, it is in our best interest to increase capacity utilisation and improve the quality of our products. This is how we make money in any case.”
Zimbabwe National Chamber of Commerce [ZNCC] president Divine Ndhlukula said industry was hamstrung by limited access to finance to acquire new machinery and replace obsolete equipment, foreign currency shortages to import raw materials, high cost of production and transportation and competition from smuggled goods as well as the informal sector.
“Industry is failing to import raw materials because of foreign currency shortages and this has an impact on production levels,” she said.
“Also business finds it difficult to pay suppliers leading to low supply levels. This promotes arbitrage opportunities for speculators.
“Basic physical infrastructure required for economic development, such as good roads and good rail transportation facilities, is not in good shape and needs to be revived to reduce the cost of doing business.”
Ndhlukula said smuggling remained rampant at the ports of entry and this needed to be addressed.
“Business is facing competition from unregistered informal sector players competing unfairly with the registered formal sector players who offer similar products or services but with added fiscal obligations,” she said.
The ZNCC boss said government should strengthen the operating environment and not crowd out private investment through chronic fiscal deficits, which end up increasing the cost of funds as well as sovereign risk.
“The unsustainable broad money supply growth, which is the biggest threat to the parity between the US$ and bond needs to be addressed and measures also need to be put in place in order to reduce concentration risk on the use of a single currency (US$), and promote the use of other currencies in the multicurrency basket,” she said, adding that government policy initiatives should be based on value chain evidence-based research.
“Policy consistency is also important and policymakers must pull in one direction and intervene to address challenges at porous border posts so as to reduce corruption and smuggling.
“It is true that strong economic foundations rooted in export-led growth are vital so that we have a strong export sector, which will help bring in the much-needed foreign currency.”
Confederation of Zimbabwe Industries president Sifelani Jabangwe said if the country could embrace a modernisation and transformation approach as highlighted by Mnangagwa, the nation would become successful and be prosperous.
“So this is something that we are definitely embracing and pushing to our membership to achieve,” he said.
“From the government obviously, we are requesting assistance in accessing finance and also forex to import raw materials.”
ZNCC Matabeleland chapter chairman, Golden Muoni said it was imposible to increase capacity utilisation as industry was using obsolete machinery.
“It’s not possible to wake up today saying we are increasing capacity because we still have a lot of problems,” he said.
“If you look at the technology issue you need capital, but our banks don’t have cheap money and when you don’t have cheap money, which is going to be used and they don’t have long-term money funding which is going to be given to the industry.”
He said banks were giving short-term money, which was very expensive and called for an interest rate regime of between 3% and 5% per annum.
“If they were not thinking outside the box, many businesses would have closed long back ago,” Muoni said.
“We have got very good quality products, but we need to improve industrial capacity and reduce the costs because the machinery is very old. We are producing products at very high costs.
“So your product, even if it of good quality, won’t be able to compete globally because you are competing with a product which is being produced using more efficient machinery. So we are not able to compete.”