Industry sings the blues as firms’ capacity utilisation stagnates

constitute about 70 percent of products in shops.
This is an indication that operating capacity has not been rising as market sentiments may suggest.
A close look at the recently revised growth targets by the Ministry of Finance reflects that the industrial capacity utilisation has been stagnant.
Most companies have capacity utilisation hovering around 60 percent with poor performers, which constitute the bulk of the companies operating below 20 percent.
It then means that most of the industrial capacity is idle. The case of companies like Delta Corporation, Innscor Africa, Dairibord Zimbabwe and Schweppes Zimbabwe, which have reported average capacity utilisation of above 70 percent, can best be described as “islands of success in a sea of stalling economy”.
These are among a few local companies with a few visible products in local supermarkets.
The extreme production level by these few companies makes it appear that there is improved activity in the manufacturing sector yet most of the industrial capacity is lying idle.
Historically, Zimbabwe had a thriving manufacturing sector with a significant number of goods produced locally.
“This explains why over 70 percent of products in the shops are from neighbouring countries especially South Africa,” economist Mr Gift Mugano said in an interview.
“This also explains why Zimbabwe is literally having a negative trade balance with all its trading partners including Malawi, Mozambique, Mauritius, Zambia and Kenya. We can’t compete.”
According to the Finance Ministry, export revenues are expected to increase to US$5,2 billion, while imports are projected to increase to US$8,2 billion this year.
This translates to a trade deficit of US$2,8 billion.
Confederation of Zimbabwe Industries president Mr Kumbirai Katsande said while figures were showing that capacity utilisation was growing, most companies were closing or scaling down.
He said that some companies that have kept operations going were “just prolonging their misery of surviving”.
“It’s a tough situation. We have many companies closing down. That level of poor performance of the manufacturing sector can be easily seen by the share of locally produced goods in supermarket shelves.”
According to the CZI, some of the companies that have closed down over the past few months include Art Corporation’s paper mill in Mutare, Lion Matches, Hunyani Mill and Art Paper Mill in Norton, the canning factory for Cairns Holdings in Mutare and its pasta factory in Bulawayo.
CAPS Holdings has also closed its plant in Harare while a number of pharmaceutical firms were operating below 25 percent capacity.
Mr Katsande said a survey would be carried out soon to establish the actual number of companies that have either completely closed shop or downsized.
At the CZI congress last month, Industry and International Trade Minister Professor Welshman Ncube expressed concern over the closure of companies in the past few months and strongly warned that more local manufacturing firms may fold.
He said: “Unfortunately, we are meeting here when the situation in industry and manufacturing sector in particular is facing serious threats to its very survival. Over the past 12 months we have seen companies close and many jobs lost.”
Mr Katsande also expressed similar concern saying: “We are faced with collapsing manufacturing companies — food processing, agro-chemicals, pharmaceutical and grain milling.
“Over the last 12 months we have seen many companies close and many jobs lost.”
The local industry is suffering from numerous ills which include inter alia, high cost of finance, regular machines breakdown due to the fact that most of the plants have outlived their lifespan and good enough to be in the national museum, critical shortages of utilities such as electricity and water.
These factors add more challenge to the cost profile of locally manufactured goods.