Source: US$1bn support for manufacturing sector | The Herald January 21, 2019
Golden Sibanda Senior Business Reporter
Government says it allocated a cumulative US$1 billion, through the Reserve Bank of Zimbabwe (RBZ) towards supporting companies in the manufacturing sector between January and December 2018, representing a 2 percent growth on allocations made in 2017.
Industry and Commerce Minister Mangaliso Ndhlovu told delegates in Harare at the launch of the Confederation of Zimbabwe Industries (CZI) manufacturing survey report that this demonstrated Government commitment to supporting industry.
CZI’s 2018 manufacturing sector survey shows that average industrial capacity utilisation grew by 3,1 percent to an average of 48,2 percent between August 2017 and August 2018 with foreign currency and policy inconsistency cited among the major drawbacks.
Minister Ndhlovu said despite the significant support Government availed to industry last year in the form of scarce foreign currency for the procurement of raw materials, there was an inverse relationship to the value of exports generated.
The disparity between the amount allocated to industry for importation of key raw materials and valued added to manufactured products and sold on export markets, reflected a US$833 million trade deficit.
This, Minister Ndhlovu said meant Zimbabwe’s manufacturing industry needed to shift its focus more towards import substitution strategies that enable the country to conserve its limited hard currency.
Zimbabwe’s exports, mostly unprocessed raw materials, were about US$3,2 billion in the nine months to October last year while imports, mostly chemicals and machinery, were roughly US$5,1 billion.
Manufacturing contributes a significant proportion of Zimbabwe’s gross domestic product, averaging just about 12 percent.
Agriculture contributes the second biggest proportion to GDP, after services, which accounts for 20 percent.
“In the period January to December 2018, the Government provided foreign currency support to the sector (excluding retail and distribution) of more than USD1,066 billion, an increase of 2 percent from the 2017 allocation.
“This accounted for 24 percent of total allocations made by Government. This is a indication that the Government is committed to fully support the growth of this critical sector owing to its potential contribution in our economy at large,” he said.
The central bank allocates about a third of Zimbabwe’s foreign currency earnings, due to inadequate availability of hard currency, to ensure equitable distribution among key sectors such as medical and fuel imports.
The minister said given that industry provides roughly 35 percent of inputs to agriculture, which in turn produces 65 percent of raw materials used in manufacturing, it was critical to support local production and sourcing of the critical inputs into manufacturing.
Added the minister; “I brought these statistics so that I challenge you, as we look ahead into 2019 to fortify our efforts towards import substitution considering that despite this support, we still experienced foreign currency shortages resulting in lost days totalling up to three months for some companies.”
Zimbabwe experienced forex shortages despite exports from the manufacturing sector growing by 54 percent in 2019 on the back of a 5 percent export incentive given by Government through the Reserve Bank of Zimbabwe.
Government has since increased the export incentive from 5 percent to 7,5 percent of a particular company’s gross annual exports value in its quest to incentivise growth in Zimbabwe’s exports.
“We, however, need to consider the figures closely and surely we have scope to far much more. Our export earnings were USD 222,6 million and this from a manufacturing sector perspective gives us a trade deficit of approximately USD843 million.
“As a sector, this is unsustainable and we can do a lot better,” the Minister said.
However, Capri chief executive and former CZI president Callisto Jokonya, said local manufacturers find it difficult to export because they are uncompetitive due to factors such as high labour costs, use of a strong currency, high utility bills and cumbersome export procedures.
He said that although manufacturing exports remained negligible due to factors affecting export competitiveness, a significant amount of raw materials imported for industry produced goods were consumed locally.
The industry minister applauded manufacturers for their close cooperation with Government, saying this was critical in the charge towards reducing the country’s dependency on imports for critical raw materials.
“Value chains that include dairy, packaging, oil seed production that include soya bean, sunflower and cotton, wheat, potatoes, fertiliser among others are at various stages of implementation and this is testimony of how much we can achieve working together,” he said.
CZI’s manufacturing sector survey showed that capacity across various sub-sectors dipped in November after Government suspended statutory instrument 122, which restricted importation of certain products.
Nonetheless, the minister said the protection of industry was against the push by African for a more open trade regime and worked effectively only if time bound.
Already, the minister said cocktail of trade barriers make Zimbabwe one of the most expensive places to export to.
However, prior to this, manufacturing capacity had been found to be highest in food stuffs, beverages, tobacco (processing) and chemical manufacturing.
The trade minister said despicable events of last week, which saw a planned stay -way turn violent resulting in closure of most businesses, destruction of property and death of civilians and a policy officer affected positive being registered in the industrial sector.
“While the space was provided for peaceful demonstrations, did we have to loot, destroy property and infrastructure? Is there a winner in all this? In my view, much as we will be counting individual losses in the days to come, our beloved Zimbabwe was the biggest loser,” he said.
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