HARARE: The Confederation of Zimbabwe Industries (CZI) said on Wednesday the manufacturing industry’s capacity utilisation has dropped by 2,2 percentage points to 34,3 percent in 2015 from 36,5 percent last year.
In its state of the manufacturing sector survey, the industry representative body said a host of internal and external pressures in the country continued to stifle the industry’s performance and recovery.
“Efforts by government to resuscitate the sector through tariffs continue to be undermined by the depreciation of the regional currencies, among other things,” the CZI said.
“Government and private sector should continue working together to address the economic decline.” A depreciation of the South African Rand, the currency used by the country’s biggest trading partner, South Africa against the United States dollar has worked to the disadvantage of the local industry as it has made exports of local companies more expensive.
Zimbabwe’s manufacturing sector has failed to fully recover from decades of economic downturn, characterised by hyperinflation, which forced the government to ditch the Zimbabwe dollar in favour of the US dollar in 2009.
Over the decades, many companies collapsed leading to job loses as companies struggled to finance their operations while battling competition from cheap imported goods. In the survey, in which around 250 companies participated, the CZI said issues affecting the local manufacturing industry remained unchanged since 2009 when the country dollarised.
Among the top challenges besetting industry are low domestic demand, capital constraints, antiquated machinery and machine breakdowns as well as competition from imports. Compounding the problems were infrastructure related challenges which include power cuts, poor road infrastructure and inefficient rail network and water shortages. Infrastructure has deteriorated as a result of years of neglect due to economic challenges, fuelled by western imposed sanctions that have seen government investing less in rehabilitation as well as new infrastructure.
The CZI said the obtaining environment impacted on the competitiveness of locally made goods which become more expensive. “The current economic environment remains largely deterrent to foreign direct investment (FDI), a major source of capital investment,” the industrial body said.
“CZI has previously called for the review of legislation that has a bearing on FDI. “This includes the review of indigenisation and empowerment act and the resolution of the debt overhang.” Zimbabwe has, however, made strides in addressing the debt overhang with its major creditors last month approving the country’s debt clearance plan.
