Industry prays for better fortunes as 2013 beckons

 

have fallen by the wayside include Lion Matches and Hunyani Pulp & Paper while others such as Cairns Holdings survived through scaling down as the highly unfriendly operating environment took its toll. Bulawayo and Mutare suffered the most as companies once domiciled in these cities trekked to the capital Harare where they still did not find the going easy.

The majority of local manufacturers, from agro-processing to textiles, are struggling and it will be a miracle if they all return to business after the annual shutdown as lack of funding and stiff competition from cheap imports continues to throttle them.

Add high operating costs, perennially unreliable utilities, New Year wage pressures and it will be a miracle for manufacturers who survived the tumultuous 2012 to see through the year 2013.

History will record 2012 as the year in which the manufacturing sector, which had been on a recovery path since the adoption of multiple currencies in 2009, declined in growth from 5 percent last year to a lowly to 2,3 percent.

Capacity utilisation also dropped for the first time since dollarisation to 44,2 percent from 57,2 percent last year.

Declining performance of the manufacturing sector continues to see Zimbabwe growing into a “basket” or “supermarket economy” as many would prefer, giving room for manufacturers from outside to cash in on the misfortunes of local ones.

South Africa is probably the biggest beneficiary of this crisis, while reports indicate that the same neighbouring economy is blocking access to the few surviving Zimbabwean companies trying to make inroads into that market, something which the Government must seriously look into.

The manufacturing sector growth is even anticipated to slump further down to  1,5 percent in 2013 as the signs point to a more difficult year for local industry when the general elections are added to the mix.

But given that most of the companies have seen the worst in Zimbabwe’s economic history following the past decade of meltdown it is most likely that they will still survive.

It will, however, take the shrewdest of chief executives to ensure that their companies survive the next year — an election year.

“We started very bullish at the beginning of the year and month by month, we have had to reduce our sales targets,” said Confederation of Zimbabwe Industries president Mr Kumbirai Katsande.

Besides the elections, absence of funding will probably be the biggest hurdle the local industry has to jump over.

“Without elections, it was already going to be a difficult year,” said Mr Katsande.
The Government has already indicated that it will carry over into next year schemes to support struggling companies such as the Zimbabwe Economic and Trade Revival Facility and the Distressed Industries and Marginalised Areas Fund.

The two facilities will provide industry with access to relatively low priced long-term loans to the tune of around US$110 million.

However, this is just a drop in the ocean against what the country’s capital thirsty industry requires.
Industry captains have said nothing short of a stimulus will allow the local industry to wake up from its deep slumber.

Others are proposing that the Government should give local banks guarantees which will allow the financial institutions to extend cheap funding to local industry.

At current high interest rates being offered by local banks, which Government apparently has failed to rein in, Zimbabwe’s manufacturing industry will remain on its knees in the coming year. The economy will continue to dish out more in imports at the expense of exports which are critical in stimulating industry revival.

Instead of waiting for the Government to deliver a miracle or wave a non-existent magic wand, business must also take serious initiatives to unlock more funding sources.

Nothing short of a huge financial boost will get industry on its feet before it can learn to walk again. As the New Year approaches, it remains to be seen how the manufacturing sector will wriggle out of the challenges that it will present. Most importantly, it will be a brighter day for the consumer if the local industry ups its game and once again delivers the local products that the nation was once upon a time familiar with. — New Ziana.