Zim industry in free fall – DailyNews Live

via Zim industry in free fall – DailyNews Live by Roadwin Chirara 11 OCTOBER 2013

Three months after the election, local industry finds itself in a precarious state, with the new government providing very few answers.

If statements by the Confederation of Zimbabwe Industries (CZI) at the launch of its Manufacturing Sector Survey are anything to go by, the sector’s future looks all but gloomy.

With the sector’s capacity utilisation plummeting to 39 percent from 44,2 percent, serious intervention measures will be required to avert total collapse.

“The situation has not improved at all since last year and industry is now in intensive care,” CZI president Charles Msipa told the annual survey launch.

If calls from the business body fail to attract urgent intervention measures, then its projected continued slow down should surely warrant some response from those in authority.

Industry, according to the CZI, is projected to grow by a mere 1,5 percent this year from 14,4 percent in 2011 and 2,3 percent last year.

“There is certainly an underlining crisis that could wipe out our industries, to leave us with industrial ruins,” economist Clemence Machadu notes.

Liquidity challenges leading to high borrowing costs; lack of competitiveness due to antiquated machinery; high power and water tariffs; as well as inflexible labour laws that have resulted in high employment costs against low productivity are pointed out as the cause factors for the sector’s woes.

“People are losing jobs. Between January and April this year, 863 workers were retrenched, according to the Retrenchment Board, compared 746 for the same period last year,” the economist said.

“Already, the industrial haemorrhage has seriously injured sub-sectors such as textiles and ginning, clothing and footwear, paper, printing and publishing, chemicals and petroleum products, as well as pharmaceuticals,” he said.

In the survey, pharmaceuticals were the hardest hit sub-sector after its capacity utilisation plunged from 58 percent in 2012 to 20 percent this year, while leather and allied were at 11,3 percent from 27,5 percent prior year.

Machadu said the current state of industry was also a result of failure by various stakeholders to fully implement policies, among them the hyped, Industrial Development Policy (IDP) and National Trade Policy (NTP) launched two years ago.

“The fact that virtually all of the IDP strategies haven’t been dealt with is clear testimony that we did not harness any of our energies in the shared and collective responsibility of carrying out the allocated tasks between government, the private sector and labour.

“This is despite the fact that some of the strategies that have not been implemented do not even require a dime to implement,” he said.

The IDP aimed to transform Zimbabwe from a producer of primary goods into a producer of processed value-added goods for both the domestic and export markets, while the NTP is aimed at having the trade function as the engine for sustainable economic growth and development of the country.

The two policies were also projected to restore the manufacturing sector’s contribution to gross domestic product (GDP) from 15 percent to 30 percent, and the sector’s contribution to exports from 26 percent to 50 percent by 2016.

Real GDP growth of seven percent was also targeted for the period 2012 to 2016 in line with the Medium Term Plan, a blue print which might be on its way-out following talk of the planned launch of the Zimbabwe Programme for Socio-economic Transformation document.

The blue prints according to the Industry ministry were going to be funded from both internal and external sources.

At one time $30 million of the $100 million allocated to the country under the special drawing rights by the International Monetary Fund was earmarked towards its funding.

President Robert Mugabe in his inauguration speech summed up the challenges of the sector including Bulawayo industry distresses were 20 000 jobs are said to have been lost.

“We are fast turning into one huge warehouse, a dumping ground for all manner of imports. Our cities and towns are dying. Bulawayo, for a long time the industrial capital of Zimbabwe, has now become a sorry industrial scrap-yard. And this has been an indicative trend for all manufacturing centres in the country,” Mugabe said.

Independent economist, Vince Musewe says the fundamental reason behind the collapse of industry can be attributed to the collapse agriculture which used to contribute about 60 percent inputs to the manufacturing sector before 2000.

“Added to this are low disposable incomes leading to reduced demand.

“We must revive agriculture as a matter of urgency but in addition we must see industry having access to enough energy and credit lines. These things are obvious to all of us,” he said.

“No it is impossible to expect industry to revive without access to credit and without customers to buy their goods.”

Musewe said Zimbabwe needs to create an investor friendly environment which translates to confidence, attracting much needed investment and capital inflows for the sector.

“Our problem is that everyone is waiting for the magic wand from government. It will not happen. We must hear government talking the right talk and walking their talk.

“Too many promises have been made in the past but if we cannot invite investors nothing will happen. These investors will not come if you scold them at every international event and when you hear that the Reserve Bank is seeking immunity for “stealing” money from companies. We need sincerity and integrity first!” he said.

The Zanu PF government which romped to victory in the July 31 election has vowed to pursue the indigenisation policy, which aims to give a controlling 51 percent stake in foreign-owned firms to locals.

The liberation party through its manifesto, themed Indigenise, Empower, Develop and Create Employment, based on the indigenisation programme, says its government will be able to create $7,3 billion in value from 1 138 indigenised firms across 14 key sectors of the economy.

It outlines 22 key areas that would define its policies over the next five years, with the initiatives creating 2,265 million jobs across key sectors of the economy and contribute to export earnings, food security and to government coffers.

It talks about the programme driving the country’s average economic growth rate to nine percent by 2018 up from the current 4,4 percent and unlocking $2 trillion into the economy.

Currently, Zimbabwe is battling a power deficit, generating an average of 961 megawatts (MW) against a national peak demand of 2 200 MW, negatively affecting the operations of various sectors of the economy and the country’s revised growth target of 3,5 percent from an initial five percent.

According to Finance ministry figures, Zimbabwe remains a net importer of South African products with a trade deficit of $3,53 million after it imported goods worth $3 207 billion against exports of $2 674 billion in 2012.

Industry minister Mike Bimha says the sector now requires $10 billion to fully recover.