adminBUY Zimbabwe has warned of looming stagnation in the country’s capacity utilisation if no fresh foreign direct investment is injected or a price boom on the local market is realised soon.
Buy Zimbabwe chief economist, Kipson Gundani, told Post Business on Wednesday that despite a slight improvement by some local industry in 2015, the bulk of industry countrywide was still suffering.
He said stagnation in the country’s capacity utilisation would result in further company closures and retrenchments which have a bearing on the poverty datum line of the country.
“Although some companies like Cairns Foods that were recently removed from judicial management are doing well, industry in general is still suffering. We are fast reaching a plateau and in dire need of fresh FDI or a price boom on the local market. The year 2015 had its positives, but we still need to fundamentally address the real challenges, otherwise we will reach a point of stagnation,” said Mr Gundani.
Confederation of Zimbabwe Industries in June revealed that the manufacturing sector recorded a 1.9 percent increase in capacity utilisation to 39 percent driven by activities in the beverages and construction sectors.
In the same period in 2014, capacity utilisation was 37.1 percent.
Since 2009 after dollarization, capacity utilisation had been declining, but only started rising in 2014 buoyed by the growth in the tobacco and the beverages sectors.
CZI said this in its submissions to the Ministry of Finance and Economic Development as input into the mid-term fiscal policy review.
It said though the manufacturing sector continued to struggle, in terms of turnover and staffing levels an improvement was recorded on year to date.
Turnover increased by 9.95 percent during the period year to date while staffing levels were up 3.4 percent for the period under review.
Mr Gundani said capacity utilisation of local industries was very important to boost the economic growth and stability.
He added that the Buy Zimbabwe campaign did not work in isolation and called on pragmatic incentives and protectionist policies on strategic products and industry.
South Africa remains the largest competitor to Zimbabwe’s manufacturing industry, accounting for 53 percent of the products on the local market amid calls for a relook at the country’s customs duty policy.
“A combination of high production costs, old machinery and limited access to cheap loans has resulted in the local manufacturing sector failing to increase its domestic market share. We need to focus on economic growth enablers with energy, infrastructure and agriculture being the major ones. There is need for Government to ensure that major roads are upgraded and expanded while railway lines are rehabilitated to cut costs on transportation of industrial goods,” said the Buy Zimbabwe economist.
He cited specific sectors such as oil expressers, poultry, dairy, clothing and tanneries that received interventions such as temporary tariffs and import licenses have started yielding positive results, calling for more such interventions across the board.
The country’s manufacturing sector operated at capacity levels around 80 percent in 1996 and recorded the lowest capacity utilisation in 2008.
Online Reporter