Zim industry sinks deeper

via Zim industry sinks deeper – DailyNews Live 9 October 2014 by John Kachembere and Roadwin Chirara

HARARE – Zimbabwe’s manufacturing sector has deteriorated further, with capacity utilisation declining by 3,3 percentage points to 36,3 percent in the year to September 2014, a latest Confederation of Zimbabwe Industries (CZI) report has revealed.

Dephine Mazambani, a senior economist with CZI, said deindustrialisation has reached catastrophic levels, with dire consequences to the state of the economy.

This comes as the country’s manufacturing sector, whose capacity utilisation stood at 39,6 percent in the year to September 2013, has failed to shake off effects of deflation and a slow-down in economic activity.

Apart from the slackening economy, coupled with weakening aggregate demand, the industry is struggling to secure meaningful credit lines, and faces massive power shortages and increased competition from cheaper imports.

The manufacturers also face high operational costs, particularly utility expenses, which renders them uncompetitive.

Mazambani said “arresting deindustrialisation will not be an easy task…both private and public sectors must take action to address the spectre of economic stagnation or decline”.

“The panacea to the challenges that the economy is facing is to stimulate production for economic recovery,” she said, adding that “this can only be achieved through pursuing consistent, transparent and predictable economic policies.”

“These need to be supported by a bold shift by government towards reducing the cost of doing business,” she said.

The manufacturing sector survey comes at a time Finance minister Patrick Chinamasa has been forced to lower Zimbabwe’s 2014 economic growth projections to 3,1 percent from 6,1 percent due to depressed performance in key sectors of the economy, agriculture and mining.

Mazambani noted that the private sector must widen its sphere of influence by tapping into regional markets.

She further stated that “the current challenges facing the economy are so intertwined that sometimes it is not easy to separate the causes from effects”.

“It is, however, important to make sure that the challenges are properly contextualised and diagnosed in order to come up with appropriate and relevant solutions to underpin economic recovery,” she said.

But, Christopher Mugaga, an independent economist, said the state of industry could be worse than indicated by CZI.

He said the manufacturing sector’s capacity utilisation could be below 30 percent due to generic challenges prevalent in the economy. “Industry in Zimbabwe is dead,” he said.

“I strongly believe that the core industry capacity utilisation cannot be above 30 percent. A cursory look at some of our manufacturing firms shows that things are worse than we think.” Eve Gadzikwa, the Standards Association of Zimbabwe (SAZ) director general, said the country needs “to do more work and regain competitiveness in areas which we have strength”.

“For instance, we should increase our exports to Zambia as opposed to South Africa where the depreciation of the Rand is affecting our competitive edge,” she said.

Mike Bimha, Industry minister, said government was crafting measures to halt the deindustrialisation.

Recently, Doing Business Committee (DBC) chair, Maureen Chitehwe, said “after all has been said and done”, Zimbabwe needs political will to arrest the country’s deteriorating business environment.

She said “there is no need to keep forming committees, (but) it’s time to roll our sleeves and get the job done”.

“Our view is that without political will, we will continue to set up ad hoc committees that will evaluate the work of sub committees that were set up to research on committees, which were defined by committees, but needed advice from a committee whose mandate was based on the recommendations of an ad hoc committee…” said Chitehwe, a lawyer by profession.

She said political will was all about policy makers deciding to act on pressing matters.