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Capacity utilisation in industry averaged 36 percent last year. Some companies have since closed shop and others are presently in the process of downsizing and re-aligning their operations as they battle foreign competition, liquidity constraints and high costs of borrowings.
But some have remained resilient.
The Confederation of Zimbabwe Industries is optimistic that the economy will rebound if the right prescription to the ailing manufacturing sector is provided. Our Business Reporter Enacy Mapakame met with new CZI president Mr Busisa Moyo at the body’s annual congress in Gweru last week to tap into his thinking on the current challenges and their possible remedies.
Q: What do you bring to industry as the new president of the CZI and where do you see Zimbabwe industry at the end of your tenure?
A: What we are going to do is bring Zimbabwe industry on a certain trajectory. We are coming from a very low base — de-industrialisation, low capacity utilisation – and what we would like to do is put industry on a growth path.
To do that, we need to bring clarity on what industries we have, to take stock of what we can do with the resources we have. We also need to look at the potential we have and how we can use what we already have to improve economic growth.
There are some easy-to-do things we can do that can change the way industry operates. Then there are some that are complicated where we need partnerships and alliances as well as financing. We hope that at the end of our tenure we will see an industry that is no longer declining but growing.
Q: What is your view on the direction the Zimbabwe economy is taking? Are you happy with it and what do you think should be done?
A: We have a few challenges, but we do not think they are insurmountable. We think we can start to address some of the challenges such as cost competitiveness, import and export permits and supporting value adding entities.
This concept (value adding) needs to be accepted because the multiplier effect of value adding entities is much higher than mercantile or importing finished goods and selling them. When value adding in manufacturing industry, it means for every job in the sector, there are six others that are created, and we find this very useful.
Q: After touring some of the key industrial companies in the Midlands provincial capital Gweru, what is your assessment of the state of industry in the province? What should relevant authorities do to address concerns raised by these companies?
A: There is potential in Gweru. There is a remnant of industry that is raring to go. I am impressed by the managers, executives and businesses here for their resilience, you can see some of the companies have gone through very difficult phases but they have kept producing and employing people.
This is commendable and I think we want to look at a wider spectrum of industry as a whole, especially those in the value addition sector. I have been discussing with the local chamber president on how to facilitate revival of industry in Gweru.
CZI has lots of access and networks around the world and could probably assist Gweru. We have a programme to look into investments and help companies prepare “investor-ready” documents that are of international standards and can be understood by foreign investors.
We look forward to return to Gweru not for congress but to analyse the opportunities available in the city because when investors come they want a quick scan of all the available opportunities in three days. We will look at all that. Quite a number of them can do value addition and beneficiation of minerals and chemicals. The infrastructure is already there, which is an added advantage.
Q: Stakeholders have called for labour reforms, arguing that labour laws are too rigid and an impediment to business growth as well as attracting investors. Then there has been a spate of job dismissals in July following a Supreme Court ruling on labour. In what ways will this work for or against industry?
A: Businesses have been waiting for labour reforms for a long time now. There has been a platform for negotiating between Government, labour and businesses that has not been fully utilised to come up with one decent position that benefits all parties. This situation could have been avoided. The question is who is to blame for this? I think we are all to blame.
The job dismissals have been necessitated by the fact that there are other problems businesses have been facing. Nobody lets go of an employee they need. The employers have been facing a lot of challenges, for instance, liquidity constraints, (high) utility charges and other costs which then impact on their ability to carry a large workforce. This was bound to happen and the question is how it would happen.
We think the labour ruling is a balanced ruling. However, we are urging companies to exercise restraint. Our colleagues in labour need to realise that loss of employment would happen if certain things were not done.
One of the things is the ability to restructure labour force. These days it’s no longer about profit but survival. If employees are not willing to be relevant to survival then companies will collapse and they will have nothing anyway.
We do understand the cost of living for employees is very high in Zimbabwe; we think the whole economy is the problem. There is a lot of work being done to rebuild the economy because it is out of balance.
And businesses have been carrying that imbalance which they cannot do alone.
Q: At several conferences, the CZI has come up with resolutions aimed at resuscitating local industry. However, industry continues to shrink with thousands of job losses. Can we say CZI is another toothless bulldog classic case? In what ways have previous CZI resolutions helped boost industrial production?
A: Your observation is fair but I do not think it is absolutely correct. There is a lot that has happened; for instance, Cairns and Blue Ribbon have come back as a result of these resolutions.
The cooking oil industry, for instance, is now operating at above 65 percent capacity utilisation and these are results of these conferences and initiatives. There is a lot happening.
We just had the Mine Entra, where industry has made a commitment to support local mining sector by looking at products that can be localised. The sector has an US$800 million expenditure on imports annually.
We want the 11 percent procured locally by the mining sector to double next year. We have a meeting with the Chamber of Mines to see how we can practically achieve this. So there are positives coming out.
We have been able to save companies that could have collapsed without Government intervention. Zimbabwe is a complicated economy and sometimes it is hard to see the positives. But look at Bata, it was in a comatose at some point but now operating at 79 percent capacity.
Q: According to figures from CZI and bodies like the World Bank, Zimbabwe’s manufacturing industry does not seem to be heading anywhere apart from down. The script to the causes of the decline has not changed – too much foreign competition, financial constraints, high production costs and low consumer spending etc. Do you believe these factors can change any time soon?
A: Absolutely, because of the labour ruling. One of the positives of this is that it will allow parastatals to restructure. A lot of parastatals have not been attracting investment because the first thing they would meet was a huge severance and this has been preventing investment.
For instance, there are people who have stayed long without working but expect to get paid. The economy can rebuild and balance. We have been talking about this on labour reforms in the past years and it is finally happening.
We have been warning Government that if no reforms are made, then more companies will close. About 80 percent of (Government) revenue goes towards labour, which is unsustainable, especially when nothing is going towards infrastructure development for instance.
So the way forward is to restructure. We just need a few changes for this economy to rebound. I believe this economy can turn around in two to three years if we do the right things.
Q: What can industry expect from this congress?
A: We want to bring clarity on national value chains. How do we get Zimbabwe to provide food and clothing for itself? We should also come up with regional and global value chains, that is look at what Zimbabwe can produce, value add and export to the regional and global market. For instance, we have organic food but we need to understand how to package it for the global market.
We also want to look at what we can supply as well as beneficiate for both the domestic and export market.
Online Reporter