via Industry seeks improved environment for better fortunes 2 July 2014 by Business Reporter
THE manufacturing industry is suffering from depressed demand on the domestic market and looks up to improvement of the business environment for better fortunes.
The sector has been hit by depressed consumer demand with the Confederation of Zimbabwe Industries (CZI) projecting that capacity utilisation would this year decline to about 30% from the 39,6% recorded in 2013.
In an interview with NewsDay CZI president Charles Msipa said performance in many sectors of the economy had been subdued in the first five months of the year.
“During the first five months, operating environment for most manufacturing firms has been characterised by significantly depressed demand on domestic market and weakening of competitiveness of many domestic producers due to the fall in value of South African Rand versus the United States Dollar during the 2012-2013 period,” Msipa said.
“Performance in many sectors in manufacturing has been subdued, and we have a significant number of firms that are in financial and/or economic distress-resulting in further job losses.”
Statistics from the Zimbabwe Congress of Trade Unions showed that 2 065 employees had lost their jobs in the first five months of the year.
Companies have lined up retrenchment programmes as they try to align their operations in the wake of depressed demand for products.
Zimbabwe Stock Exchange-listed companies First Mutual Holdings Limited, Rainbow Tourism Group and Hwange Colliery Company Limited have said that they will shed some jobs.
In the outlook, Msipa said it depends “on the speed with which economic actors and policymakers move to implement policy initiatives designed to increase capital inflows into the country and to improve the “doing business environment” in Zimbabwe to enable local manufacturers to improve their competitiveness”.
The manufacturing sector is also hit by erratic power supplies and as such has to invest in generators thereby pushing up the cost of production. This has ultimately made local products uncompetitive to those in the region.
Shortage of long-term financing has also made retooling a tall order leaving companies stuck with antiquated equipment. This has also increased the cost of production.
According to ZimTrade’s Export Manufacturing Capacity Survey for 2013, over 70% of local companies that have been exporting in the past 10 years have ceased to do so due to numerous challenges besetting the industry.
The low export capacity comes at a time there is a ready market for locals especially in Angola, according to latest findings from a study commissioned by ZimTrade.