HARARE: A new report by Zimbabwe’s business lobby group – Confederation of Zimbabwe Industries (CZI) – has revealed that capacity utilisation within the manufacturing sector has dropped to 34.3 % this year, from last year’s 36.5 %.
The report said the continued slide demonstrates the failure of combined government and private sector efforts to arrest de-industrialisation and was endemic of the country’s economic crisis.
The decline, which represents a cumulative 23 percentage point fall from 57% in 2012, shows a worsening economic crisis, the lobby group said. CZI attributed the decline in capacity utilisation to capital constraints and antiquated machinery. “The weighted capacity utilisation has shed 2.2 percentage points from 36.5% to 34.3%.
“On average, small companies (between five employees and 19 employees) are operating at 26% capacity utilisation, while medium companies (between 20 and 99 employees) are operating at 36.1%. The larger firms (100 and more employees) are operating at 43.1%,” the body said.
The industrial body conducts an annual survey of industrial development and its manufacturing report is the most comprehensive private-sector led survey, which assesses industrial performance. At least 15 economic sub-sectors are surveyed, among them clothing and textile, pharmaceuticals, grain and milling, oil among other industrial manufacturing activities.
CZI said a combined 65.7% of industrial capacity utilisation was idle in 2015, 2.2 percentage points up from 63,5% in 2014 after more firms failed due to power cuts and difficulties in accessing working capital and expansion from internal and offshore sources.
Analysts contend that hostile policies such as the indigenisation law have worsened an already bad investment climate and aggravated resentment by business over the status quo. This has the effect of repelling foreign direct investment inflows (FDI) and keeping lenders on the edge. At the launch of the reports, CZI president, Busisa Moyo described the research findings as critical to Zimbabwe’s economy.
Buy Zimbabwe chief economist, Kipson Gundani said the decline reflects the messy state of the economy. “This is just confirming reality, companies are suffering and this is shown by the continued decline in capacity utilisation,” he said. “The decline in capacity utilisation and the rate at which it is declining shows the economy has reached a plateau.”
Industry and Commerce minister, Mike Bimha said the government had put in place several measures to help industries avoid collapse. “There are things that we have done, but we will not see instant results,” he said.
CZI chief economist, Dephine Mazambani-Mutaferi said businesses in the country had not been viable, with only 5% indicating viability. Sixty-three per cent indicated that they were facing stiff competition from both local and international products.
