adminSpeaking during Mine Entra 2012 conference in Bulawayo on Wednesday, he said the country’s supply sector was in doldrums and the situation was getting worse due to increased production costs facing industries.
He said shortage of working capital, aged equipment, excessive interest rates on funding as well as policy inconsistencies by Government continued to under-mine the competitiveness of the manufacturing sector.
“The performance of the supply sector is subdued as shown by the level of capacity utilisation.
“According to the Confederation of Zimbabwe Industries, manufacturing survey report, capacity utilisation in the manufacturing sector was at 57.2 percent in 2011. Such low levels are also experienced in the retail sector. This means that the local suppliers’ market share has gone to foreign counterparts as the country is moving to a point of becoming a net importer,” said Mr Muchana.
He said the manufacturing sector requires an estimated $2 billion for recapitalisation.
“Lack of Government support is crippling the economy. Just recently, we heard reports that out of the $40 million under the Distressed Industries and Marginalised Areas Fund, only $10 million has been disbursed while the bulk of the money is lying somewhere idle yet industry needs the funds,” he said.
He said liquidity constraints in the economy and use of antiquated equipment weighed down efforts to revive the manufacturing sector.
“In the past decade, Zimbabwe has gone through economic decay. Our situation is getting worse as productive time has to be spent repairing aged equipment resulting in cost of production becoming very high,” he said.
“The working capital challenges have seen us failing to stock our inventory. In face of liquidity constraints, the cost of financing is excessive with interest rates as high as 20 percent per year.
“In cases where funding is available, financiers do not give the market time to pay as the tenor is very short.
“The liquidity issue is also worsened as the Reserve Bank of Zimbabwe is yet to assume its lender of last resort function.”
Mr Muchana said Government needed to come up with initiatives to grow the sector such as trade protectionist policies on industries that have the competitive edge to meet the national demand.
“Such initiatives also include extending funding to small and medium enterprises (SMEs). The Zimbabwe National Chamber of Commerce recently noted that some traditional large local manufacturers are not flexible; are too bureaucratic and still use outdated business models calling for the need to extend funding to some of the SMEs with a potential to grow the economy,” he said.
Online Reporter