adminAN estimated 70 percent of local companies are embarking on a raft of aggressive cost-cutting measures that include placing employees on “extended leave” as they continue to battle high operational costs in an illiquid economy, industry experts have said.
Last week, Stallone Consultancy managing consultant Mr Zack Murerwa said most companies in Harare and Bulawayo continue to struggle; adding that while most firms wanted to retrench, they did not have the resources to do so.
“In terms of cost-cutting measures, 70 percent of companies in Harare alone are cutting costs through whatever means available, while in Bulawayo, we speak of company closures. Many have failed to open timeously and others are extending leave days for workers,” said Mr Murerwa.
The foundry sector continues to be affected by delays in the re-opening of the troubled iron and steel manufacturer giant, New ZimSteel, former Ziscosteel.
In September 2011, an Indian conglomerate, Essar Holdings, bought a 54 percent stake in Ziscosteel from Government in a US$750 million deal.
Mr Murerwa noted that political will will be crucial in implementing any measures put in place by Government to improve the country’s economic landscape and attract Foreign Direct Investment (FDI). The latest Confederation of Zimbabwe Industries (CZI) manufacturing survey indicates that FDI has remained depressed as the number of manufacturing firms that did new capital investments through FDI remained at 5 percent.
Statistics from the Reserve Bank of Zimbabwe also show that on average, FDI for Zimbabwe between 2002 and 2012 was $88 million compared to $800 million for Zambia.
Mozambique received $586 million while Botswana had $486 million. Added Mr Murerwa: “Zimbabwe needs laws that suit the prevailing economic environment. If a company has no money to fund its business, it certainly cannot afford to pay for retrenchments or employees who are idle.”
Last year, the (CZI) manufacturing sector survey report showed capacity utilisation suffered a 3,3 percent decline to 36,3 percent from a year earlier weighed down by low consumer demand, cash constraints, antiquated machinery, inflexible labour laws and utility shortages. Of the companies surveyed by CZI, 54 percent said business was not viable in 2014.
However, CZI Mashonaland Chamber president Mr Sifelani Jabangwe indicated that the return of some local brands on supermarket shelves was a sign that the manufacturing sector is recovering.
Brands such as Olivine, Panol, Red Seal and Pure Drop are slowly regaining their footing on the market. Similarly, products from companies such as Dairibord, Dendairy and Alpha Omega have become more visible.
Local packaging has also significantly improved, with manufacturers being innovative enough to introduce smaller packages that are more affordable to a wider range of consumers. Liquidity challenges, including rising competition from imports, are the major stumbling blocks, said Mr Jabangwe.
“The devaluation of the South African rand and cheap imports will remain a problem,” he said.
South Africa is Zimbabwe’s biggest trading partner.
Online Reporter