Lens on manufacturing as CZI congress opens

debate also on the impact of the recently launched industrial development and trade policies.
The congress, to be held in Nyanga under the theme “Restoring manufacturing as a key pillar for leap-frogging Zimbabwe economy” comes at a time when most companies are still operating below capacity.
Most are constrained by various factors, including   high utility costs, expensive capital, use of old equipment and technology.
Most local products are less competitive compared with imports due to the local companies’ high operating cost structures.
The Employers’ Confederation of Zimbabwe has warned of increasing retrenchments as companies hedge against rising labour costs.
Low capacity utilisation and product demand, obsolete machinery susceptible to frequent breakdowns, lack of working capital and raw materials are some of the factors triggering retrenchments.
On average, capacity utilisation of the manufacturing sector is around 60 percent.
Poor performance of the agricultural sector has also led to a stagnant growth in the manufacturing sector. This is particularly so because almost 70 percent of industrial raw materials come from the agricultural sector.
Agriculture is expected to register a negative 5 percent growth this year.
Since 2009, investment into the manufacturing sector has remained subdued, with only 17 percent of local companies managing to secure investments, according to statistics from the Ministry of Finance.
According to the CZI, about US$2 billion is needed to revive industry.
Most companies are borrowing at “extortionate rates” of around 15-25 percent as compared with regional firms, notably South Africa, where they are as low as 8 percent.
As a result, a company operating in SA has access to cheaper funds than its Zimbabwean counterpart.
Government has made efforts to help through DiMAF (Distressed and Marginalised Fund) and ZETRF (Zimbabwe Economic and Trade Revival Fund).
As at June 30 this year, about US$4 million had been disbursed under DiMAF. Some companies are now paying wages based on performance due to excessive stoppages due to power cuts.
The congress is also expected to debate whether targets set in the industrial policy and trade policy are attainable in light of the liquidity crunch.
The Industrial Development Policy (2012-2016) seeks to transform Zimbabwe from a producer of primary goods to a producer of value-added goods for domestic and export markets.
The policy would also promote viable industrial and commercial sectors as well as domestic and international trade for a vibrant, self-sustaining and competitive economy. The policy seeks to restore the manufacturing sector’s GDP contribution from 15 percent to 30 percent, exports from 26 percent to 50 percent by 2015, consistent with the Medium Term Plan.
It also targets an average real GDP growth of 7 percent.The policy looks at creating employment in the manufacturing sector, increase capacity utilisation from 57 percent to 80 percent, re-equip and replace obsolete machinery, new technologies for import substitution, while enhancing value addition, among other objec-tives.
In an interview last week, CZI president Mr Kumbirai Katsande said the congress would seek to draw lessons on sustainable economic growth from Brazil.
He said although Brazil’s economic growth had appeared to stutter since late last year, it is on record as having achieved the largest growth in the last 25                          years.
He said CZI believed that Brazil, a member of the BRICS (Brazil, Russia, India, China and South Africa) block of fast-growing economies, could proffer tips on how to achieve sustainable growth.
Main speakers are expected include Minister of Industry and Commerce Professor Welshman Ncube and his permanent secretary, Ms Abigail Shonhiwa, Brazilian Ambassador to Zimbabwe Marcia Maro da Silva. Reserve Bank of Zimbabwe Governor Dr Gideon Gono, head of European Union delegation to Zimbabwe Ambasador Aldo Dell’Aricca and Deputy Prime Minister Arthur Mutambara.