Manufacturing sector grows, but . . .

multiple currency system in 2009, but expansion has been slowed down by lack of funding.
Production capacity has grown from about 10 percent in 2008 to 30 percent in 2009 before inching further to 43,7 percent in 2010 and then to 57,2 percent this year.
Notwithstanding the increase in production capacity, the sector remains constrained by several factors including lack of funding, low product demand, machine breakdowns and an influx of low priced imports.

The Confederation of Zimbabwe Industries 2011 Manufacturing Survey indicates that the issue of investment is critical for the full resuscitation of the manufacturing sector.
However, levels of investment in plant and machinery continued to rise, raising capacity utilisation, but this is inadequate for the sector to operate at full capacity.
Zimbabwe requires an estimated US$2 billion to operate at full capacity. During the first six months of the year only US$45 million found its way into the manufacturing sector.

Capacity utilisation has remained below full potential due to the high cost of both local and imported raw materials.
Against this background, the manufacturing sector recorded a growth in output on 14 percent during the first half of 2011, compared to the 34 percent recorded over the same period in 2010. In addition, the cost of production remains high with continued rises in the cost of labour and utilities.

High cost of production, coupled with low levels of capacity utilisation and inferior product quality has largely rendered Zimbabwe’s manufactured goods uncompetitive both on the regional and international markets.

The sector has also suffered from the influx of cheap imports coming from neighbouring countries and Asia.

Zimbabwean product systems are expensive compared to other products in the region due to the high cost of funding and inefficient production systems, which puts pressure on prices. What this means is that production will remain low as consumers go for the cheap imported products, though, at times, of low quality. To an extent, the quality of locally produced goods does not match international standards. High cost of labour is also affecting the cost of production.

According to the survey, wages and salaries as a percentage of total expenses ranged from 12 percent to as high as 60 percent.
In an economy where inflation is averaging four percent, the continued awarding of salaries and wage adjustments in excess of 20 percent is only serving to render business unviable in the medium to long term.

CBZ Bank chief executive, Dr John Mangudya said lack of affordable working capital and long term financing to retool is adversely affecting output growth.
“It is against this back ground that we have been leading the way in addressing some of the problems associated with the accessibility of credit lines availed by some of our development partners in the region,” said Dr Mangudya.

CBZ has so far injected US$120 million into manufacturing companies.
Commenting on the performance of the sector, Vice President Joice Mujuru said the financial sector should come up with strategies to support the manufacturing sector.
“Government is committed to source funding for the sector, which is the cornerstone of economic development.

“The financial sector should put in place strategies to improve lending to the sector and Government will continue to call for the lifting of sanctions to access lines of credit,” said the vice president.
She added that erratic power supplies are affecting economic growth and that challenges are opening up opportunities to invest across all forms of energy.
CZI president, Dr Joseph Kanyekanye said, “It is also quite evident that the level of external budget that could free resources for lending to industry has not been forthcoming. We ought to come together as Zimbabweans to fight this”.

The manufacturing sector’s contribution to Gross Domestic Product is projected to grow to 30 percent from 10 percent over the next five years.
The growth would be anchored on increased industrial output due to a cocktail of measures aimed at addressing production constraints and deliberate efforts to ensure value addition to local products.

In the long term Government through the Medium Term Plan, seeks to increase capacity utilisation to 80 percent by 2015 and restore the manufactured exports to 50 percent of total exports in line with the Industrial Development Policy.