High production costs suffocate Zim firms

via High production costs suffocate Zim firms – NewsDay Zimbabwe April 10, 2015

ZIMBABWEAN companies’ borrowing costs are at least twice the level experienced in the region pushing up production costs and making local products uncompetitive, the African Development Bank (AfDB) has said.

Local products have failed to compete in the region as they become uncompetitive. In addition, the influx of foreign products.

AfDB said in a latest report on Zimbabwe that despite various measures intended to rescue the manufacturing sector through the 2015 National Budget Statement, “competitiveness of manufactured products is compromised mainly due to high production costs compared to those prevailing in neighbouring countries”.

“On average, Zimbabwean firms’ borrowing costs (estimated at an average of 28% in 2013) are twice to three times the levels observed in the region,” AfDB said.

“The real weighted average lending rates for corporates and individuals tightened over the period December 2013 to December 2014 with possible negative effects on aggregate output growth as the cost of borrowing for investment and consumption increases.”

AfDB said average cost of commercial electricity in Botswana, Mozambique, South Africa and Zambia was 8,3 United States cents per KWh, which is 57% of what Zimbabwean businesses pay for electricity.

Zimbabwe businesses also pay on average twice as many taxes for imported inputs than neighbouring countries due to high import tariff levels (inclusive of the introduced 25% import surtax),” the bank said.

The country’s manufacturing sector has been under stress from the harsh economic environment. This saw capacity utilisation shedding 3 percentage points, to 36,3% last year from 39,6% in 2013.