These are encouraging economic signs 

Source: These are encouraging economic signs – DailyNews Live

hama saburi      29 October 2017

HARARE – It’s not every time that hard-pressed Zimbabweans get to hear
news from industrialists that cheers them up because conversations amongst
business leaders are most of the time dominated by depressing news.

If it’s not the slow pace of bank transfers for cross-border transactions
occasioned by the liquidity crisis, the discourse is centred on fending
off an intrusive taxman desperate for money to fund central government;
beating inflation or ensuring there is sufficient money in bank accounts
to take care of salaries and other pressing commitments. It is such a
tired and boring narrative that now sounds like a broken record.

Around this time every year, it is becoming predictable for the country’s
largest industrial lobby group – the Confederation of Zimbabwe Industries
(CZI) – to spoil the Christmas mood by releasing drab Manufacturing Sector
Survey data whose major highlight has been the decline in capacity
utilisation.

The 2017 survey was no different: That periodic statistic (capacity
utilisation), headlined CZI’s survey results. Weighted capacity
utilisation dropped by 2,3 percent from 47,4 percent in 2016 to 45,1
percent owing to challenges in sectors such as non-metalic products, wood
and furniture, transport and equipment and petroleum products.

For the first time in as many years, the CZI survey had something worth
celebrating. While capacity utilisation went further down during the
period surveyed, manufactured output grew by 5,5 percent, propelled by
growth in non-metalic mineral products such as cement manufacturers,
producers of clay and ceramic products. Hear! Hear!

This segments forms part of the construction industry – one of the most
volatile sectors in any functional economy – also regarded as a barometer
for the wider economy. Growth in any segment of the construction industry
has a feel good factor on the rest of the country’s economy.

More importantly, it corroborates talk that Zimbabwe’s economy is on the
rebound. Reserve Bank of Zimbabwe (RBZ) governor, John Mangudya, has said
as much but few believed him because he is part of a thoroughly
discredited government that is struggling to regain public confidence
because of how it has mismanaged the country’s economy.

Numbers don’t lie! The fact this is coming from CZI gives credibility to
Mangudya’s pronouncements.

According to CZI, the growth in output came from companies whose machinery
is less than 10 years, an indication that those firms that have re-tooled
are being rewarded for their efforts.

On the contrary, those companies stuck with their antiquated machinery
susceptible to frequent breakdowns and which are now too costly to
maintain, have been caught up in a time warp. Unless they dust themselves
up and join the wave, they risk being consigned to the corporate
graveyard.

This is not a threat; it’s real.

In December 2014, former Finance minister Patrick Chinamasa set tongues
wagging when he remarked in Parliament during his national budget
presentation that in order for a new economy to emerge the old one must
first die.

No-one took him seriously.

But that those companies that have invested heavily in new equipment are
registering growth in output vindicates Chinamasa to some extent. The
former Finance minister must be saying “I told you so”, even as he tries
to set up Zimbabwe’s latest bureaucracy, as the new minister of
high-sounding Cyber Security, Threat Detection and Mitigation.

As industry’s chief representative, CZI must be lauded for heeding the
call by government and other agencies to re-tool and produce, as well as
for its advocacy role that has seen various positive initiatives coming on
stream to capacitate its members.

One such initiative has been the RBZ’s export incentive scheme and
Statutory Instrument 64 of 2016 introduced by the ministry of Industry and
International Trade. These initiatives, amongst others, have given local
companies some breathing space.

CZI’s 2017 survey results indicate that Zimbabwe could be on course to
achieve the 3,7 percent growth as forecasted by government and the 2,8
percent growth projected by the International Monetary Fund (IMF) and
other international trade and economic agencies. In fact, the IMF revised
its growth forecast from the previous two percent.

My source of optimism is premised on nothing other than the fact that
outside of the manufacturing sector, there are other industries that are
on the rebound, among them tourism, agriculture and mining. If one is to
add the numbers coming from these sectors, Zimbabwe may as well be on
course to achieve the 3,7 percent growth, cumulatively.

Having tweaked its survey approach this year with encouraging results, CZI
must not end there. There are many other areas that can be covered by the
survey beyond tracking capacity utilisation. The by-words these days are
retooling, opening new markets, and seeking partnership, and somehow these
different slants need to be reflected in the survey just as we have seen
CZI revealing progress made in empowering women in the manufacturing
sector.

From the feedback received thus far, capacity utilisation, while still
relevant, no longer commands as much weight as before because it does not
reflect the true picture in our industry where the loss of export markets
in the crisis period (2000 to 2007) has meant that those companies that
were producing for export may never fully utilise their capacities unless
there is a total shift in their mindsets towards rekindling their lost
export markets.

What that means is that big companies that used to produce 90 percent of
their production for export can weigh down the overall capacity
utilisation even though the 10 percent capacity being utilised is
sufficient to cater for the domestic market.

The reduction in capacity utilisation should therefore not be a major
issue because it is a function of the percentage of the firm’s total
possible production capacity that is actually being used thus it does not
measure growth. By CZI’s own definition, it refers to the relationship
between actual output that is actually produced with the installed
equipment and the potential output which could be produced with it if
capacity was fully used.

It is therefore not surprising that throughout the world, economic growth
is measured by the increase in output of goods produced, otherwise known
as the Gross Domestic Product (or GDP).

Now that output is on a positive trajectory, there is need to maintain the
momentum by ensuring that the excess capacity is used to grow exports but
for that to happen companies must become competitive.

It is pleasing to note that 13 percent of companies surveyed have
increased exports. This is partly a result of the RBZ’s bias towards
rewarding exporters which has benefited companies such as Paramount
Garments, Arenel Sweets, Cairns and Capri, to mention but a few.

Companies in the packaging industry are also doing exceptionally well with
most of them operating at above 75 percent capacity.

This is worth celebrating.

To Mangudya and team at the RBZ, do not take the foot off the pedal.

You are on the right track!

COMMENTS

WORDPRESS: 3
  • comment-avatar
    Morty Smith 5 years ago

    The construction sector is doing well because that is the only safe way to store money if you cannot get US$. The author is a dummy or a ZANU apologist

  • comment-avatar

    If you ignore capacity utilization then you know nothing about competitiveness. I support Monty smith

  • comment-avatar
    Rick ross 5 years ago

    If you talk of ignoring capacity utilisation then you know nothing about competetiviness. How can you compete with declining capacity utilisation. The next sector to collapse is the construction sector. I agree with morty Smith.