Industry in free fall

via Industry in free fall | The Financial Gazette by Shame Makoshori 3 Oct 2013

ONLY 10 out of the 74-companies listed on the Zimbabwe Stock Exchange (ZSE) are in good shape while over 100 firms have closed shop since 2011, signifying an industrial ‘Armage-ddon’ that requires swift remedial action if further de-industrialisation is to be averted.

Also quite telling is that capacity utilisation in the manufacturing sector has dropped by more than five percent from December last year.

The shocking evidence of an industrial calamity rattling the country emerged yesterday with a Confede-ration of Zimbabwe Industries (CZI) survey indicating that more manufacturing firms have sunk deeper into turmoil between last November and this month.

The manufacturing sector report released by the CZI in partnership with the Financial Gazette and CBZ Holdings yesterday revealed that capacity utilisation in the manufacturing sector slid by 5,3 percentage points to 39,6 percent this year, compared to 44,2 percent in 2012.

Cumulatively, capacity utilisation has plummeted by 17,4 percent since 2011.

Industrialists warned of an impending industrial “Armageddon” and called for swift intervention by government and the private sector to arrest the haemorrhage.

“It is an industrial Armageddon,” said ZSE chairperson, Eve Gadzikwa, who revealed that only 10 out of the 74-member local bourse were in good shape.
“The rest are teetering,” Gadzi-kwa told government and industry executives yesterday.

At least four manufacturing counters have de-listed this year after falling into the firestorm.
These include former bellwether stocks such as Apex Corporation Limited, Gulliver Consolidated Limi-ted, Steelnet Limited and Lifestyle Holdings Limited.
Steelnet has since slid into liquidation.

Outside listed firms, the bloodbath is written all over, with over 100 firms having closed shop since 2011, the majority of them in Bulawayo and Mutare.
Yesterday’s report portrayed an industry in a vicious circle, with only two out of a total of 250 executives surveyed saying their plants were running at full throttle.

The crisis has been more pronounced in the leather and allied industries where capacity utilisation declined to 11,3 percent this year, from 27 percent in 2012.
Pharmaceutical industry, whose crisis has been highlighted by the problems at CAPS Holdings, the country’s largest player, saw its capacity trimmed to 20 percent this year, from 58 percent in 2012, while capacity in car assembly plants declined to 13,1 percent, from 30,3 percent.

CZI said staff costs were contributing 24 percent to production costs, and 14 percent of the polled chief executive officers (CEOs) indicated that they had reacted by cutting jobs.
About 77 percent of the respondents failed to contain a ballooning wage bill.
Only 12 percent had recruited new staff.

When Zimbabwe switched to multi-currencies in February 2009, bringing inflation to -7,7 percent, from 500 billion percent in December 2008, the policy changes were greeted by optimism.
The manufacturing sector had hoped that a decade-long crisis that had forced the closure of 850 firms had ended.
But this week’s report gave the impression of an industry in a rollercoaster mode.

“Industrialists expressed concern that the current economic environment was no longer conducive for businesses to thrive. Following the rebound in 2009 in the manufacturing sector, growth is now fading,” said CZI.
“The slow down being experienced in the economy at large has not spared the manufacturing sector. From the total respondents, only 35,7 percent recorded capacity utilisations of above 50 percent, with only two firms recording capacity utilisation of 100 percent. Forty eight percent indicated that business has not improved at all and has actually been declining, 16 percent recorded a slight increase, and only seven percent recorded a significant improvement in business viability. Sixty percent of the respondents did not carry out any new investment in the year 2013. Ninety percent invested in machinery and equipment, while 10 percent invested in land and buildings,” the report said.

It cast aspersions on the continued liquidity stress roiling industries, suggesting that this could only be resolved through an aggressive mobilisation of long-term capital.
Yesterday, CZI president, Charles Msipa, acknowledged that job seekers were at crossroads.
“The situation has not improved at all (since last year’s survey),” he said.

“The prognosis is not looking good. We are inundated with job seekers, but we are cutting back,” Msipa said.
CZI blamed the de-industrialisation to a glut of cheap imports, which have been gnawing into a market previously dominated by local producers.
It said difficulties in accessing capital and the absence of long-term funding had affected operations.

High power costs and slackening delivery of electricity to plants has had far reaching consequences on production.
Olivine Industries managing director, Jonas Mushangari, also argued yesterday that poor financial management and prioritisation had resulted in most of the cash available for retooling industry being spent on imports.
Oil processing industries, for instance, were spending over US$240 million per annum on imports, yet only US$120 million was required to invest in planting the required seeds for raw materials.
“We are in a vicious circle,” said CBZ Holdings CEO, John Mangudya.

“We need to break the vicious circle. We need to move away from a first wave society that depends on agriculture. The manufacturing sector is the backbone of the economy, let’s create money. The time is now to change the situation, the time is now for Essar to commence production and the time is now for Green Fuel to produce fuel,” said Mangudya.
Essar, an Indian steel producer that was expected to take over operations at the Zimbabwe Iron and Steel Company in Kwekwe, now renamed New Zimsteel, has been waiting for the green light to commence production since 2011.

Red tape in government has also led to delays in full scale fuel extraction at Green Fuel’s Chiredzi plant.
Industry and Commerce Minister, Mike Bimha, said the new government that came into office after polls in July, had hit the ground running.
Yet another recovery plan, the Zimbabwe Programme for Socio-Economic Transformation, would soon be rolled out to deal with problems gripping an economy described by Msipa as in “the intensive care”.

 

COMMENTS

WORDPRESS: 3
  • comment-avatar
    bingo wajakata 7 years ago

    Someone should write a book on recovery programmes in Zimbabwe. How many so far? I doubt even Mugabe can remember, the only easy part is answering the question of the achievements of these programs! Zero, zilch, nothing! Leadership by patronage and fear does not work. Its the reason why Zimbabwe has gone to the grave

  • comment-avatar

    Ndokutonga kwemagandanga uku.

    As long as he can ignite his car nekuisa mukadzi wake, nyika inenge ichiri kufamba

  • comment-avatar
    Yes Sir Boss My ass 7 years ago

    A tyranny does not necessarily have to be violent. Ask Zimbabweans. Actually, a non-violent one is more pervasive, more real as citizens begin to believe that there is no outside.

    In Zimbabwe, it has created a persuasive and repetitive myth that only one man can be President for life; that only Zanu PF members can have access to new opportunities and lead a better life than most; that only those who are politically connected through birth, association or sheer audacity must have an advantage and be entitled unbridled access to the wealth of Zimbabwe. That only our “freedom” fighters can be heroes.

    It will not be easy to change our circumstances or move our country into a modern democracy because we have been psychologically complicit in creating a social system that does not respect our own needs and aspirations. Our tyranny is manufactured by the people of Zimbabwe, for the people of Zimbabwe — that is the hardest fact to accept.

    You see, dictatorships can only arise and flourish where very specific conditions are met. Critical to an effective dictatorship are people with a low self-esteem and who have a victim mentality. People who believe it is outside them that change can emanate. In such instances, the political leadership must also meet these same conditions; they must have a destructive and incessant low self-esteem and must, therefore, put to good use all tools and forms of oppression to shield their egos and vulnerability.

    They must continually claim all that is good in society, and blame all that is bad on others. This works in arresting potential, stifling growth, spreading poverty and hopelessness so that citizens may remain complainants to a system that they abhor.

    Dictators mirror their low self-esteem on the society which they seek to oppress and in that society, must be those individuals who are willing to support that low self-esteem with theirs.

    A dictator must surround himself with praise singers and charlatans whose only interest is to see how they can benefit from the dictator. The dictator will then reward those who praise and fear him and incarcerate or injure those who refuse to do so.

    He will bring close those he fears so that he may decimate their individuality and independent thought. This psychology of victim mentality slowly and thoroughly spreads itself in every sphere of society and becomes the DNA of that society. Everything is designed and manipulated to extend and fortify the lie that there is no outside.

    You must agree with me that this is a formidable force to dismantle. Societies change slowly; a day at a time and that is our task here in Zimbabwe. It will take new conversations about an alternative to be repeatedly discussed and shared with all. It will take years of reconditioning the minds of our citizens so that they can begin to believe that they are the source of the fuel to our dictatorship; that they must actually shut down that supply if things are to change for the better. That is where we must go as a society.

    We will face harsh resistance from those who are to benefit from retaining the status quo and a lukewarm response from those who could benefit from the any changed circumstances. It is a protracted battle of ideas that is lonely, difficult and unpredictable.

    In my view regardless of what some are saying now, the MDC began 13 years ago to try and take us there and we must have the foresight and the courage to continue on that road despite how bleak our future may look now.

    The difficult task is how we lead our communities so that their quality of life cannot be negatively impacted upon by bad politics. How do we create a society that is not driven by fear of loss of income or assets if they choose an outside? How do we prevent a dictatorship from using economics to imprison us?