via Manufacturing sector still struggling: CZI – NewsDay Zimbabwe April 6, 2016
THE Confederation of Zimbabwe Industries (CZI) has said the performance of the manufacturing sector during the first quarter of the year was worse off compared to the same period last year as business confidence in the country remains very low.
BY VICTORIA MTOMBA
CZI president Busisa Moyo (pictured) said in an interview yesterday that although a business confidence index data and purchasing manager’s index data was still under compilation, things were not looking good for the sector.
“Output is also depressed on the back of high festive inventories that were built up in quarter four of 2015 which have been slow to clear. Output is 10-20% down across most industries,” he said.
Moyo said uncertainty and mixed messages from the legislative and political environment have also taken their toll on business, resulting in businesses cutting back on spending on new projects and employment.
“This year is worse than last year. The outlook is bleak, bitter and arduous. Business is still, however, committed and resilient. Our problems are not insurmountable,” he said.
The manufacturing sector was facing challenges due to competition from imported goods which were cheaper compared to local ones.
“Smuggling, corruption and sophisticated syndicates are taking advantage of this to the detriment of local production. Business is also looking at acquiring equipment from South Africa to take advantage of the weak Rand,” he said.
“Another unexpected, but positive consequence is that South African companies now view having an operation or subsidiary in Zimbabwe as a hedge against an unstable Rand. Dollar based operations are attractive.”
Moyo said businesses were also facing challenges of low consumer spending and inventories are not moving. He said threats of aid reduction would exacerbate the problem. The CZI boss expressed concern on the increased liquidity challenges in the country.
“We are gravely concerned by the growing and gaping hole in terms of internal liquidity which may point to a deeper problem. There are increased delays from instructing bank to foreign suppliers receiving payments,” he said.
The manufacturing sector capacity utilisation level has been on a decline since 2012 and last year it was just over 40%.
Early this year, CZI had projected that the figure would increase by about 10% but it seems that will not happen due to indigenisation issues which are not yet finalised.