Manufacturing sector to boost GDP

the next five years, a Cabinet minister said this week.
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.

Already, improvement had been noted, with industrial capacity rising from below 10 percent in 2008 to an average of 50 percent today, although a number of challenges still constrain industry, the minister said.
Officially opening the Confederation of Zimbabwe Industries annual congress here, Industry and Commerce Minister Professor Welshman Ncube said the manufacturing sector’s contribution to exports was also projected to increase from about 15 percent to 26 percent over the same period.

But Prof Ncube said Zimbabwe needed to dump the “destructive political bickering” of the last decade. He said this had seen business coming out as the biggest casualty and the economy had almost collapsed, as a result.

He said Government planned to introduce a number of measures to address the main challenges to industry. The new strategies would be introduced through the Industrial Development Policy, which he said had been targeted to run from 2011 to 2015.

He said Government needed to act fast in implementing policies while abandoning its rhetoric on policy consistency.
The Government also needed to act to ensure policy certainty.

“When (policy is) fully developed and adopted our idea is to meet all the targets that we set in the Medium Term Plan,” he said. “The policy identifies manufacturing key clusters with potential for transformation of the economy and value addition. That is very important.”

Prof Ncube lamented the slow pace at which the approval of the industrial policy was moving in Government, as it would deal with issues of industrial challenges such as funding, capacity utilisation and value addition to local minerals and agricultural products, among others.

But he said the challenge remained on strategies to create capacity to value-add products largely exported in their raw form, which resulted in loss of potential export inflows.
The biggest challenge facing Government in transforming industrial production and productivity remained that of funding. Industry required US$2 billion to modernise operations, he said.

Against this background, Minister Ncube said Government envisaged creating an Industrial Development Bank of Zimbabwe dedicated to meeting the requirements of manufacturing.
This comes as it emerged that close to US$1 billion in external lines of credit secured by banks lay unutilised, as companies could not afford the “prohibitively” expensive money.

Efforts will thus be directed at ensuring that interest rates charged in Zimbabwe are comparable with anywhere else in the world.
But Government would have to move mountains to create liquidity that would increase competition for those in need of funding.

The Reserve Bank of Zimbabwe recently revealed it had approved US$1,6 billion lines of credit in the six months to June, secured by banks from external sources, but only US$600 million had been disbursed to industry.

Failure to meet draw-down conditions and terms set by offshore lenders were cited as some of the reasons distressed companies were failing to access the funding earmarked for them.
Prof Ncube said the Government should therefore come up with a fund to assist all distressed companies, as some of them were closing down, creating unemployment.

He said Government would take measures to lessen the burden on the manufacturing sector by removing import duty and value added tax on raw and packaging material.
It would also impose duty on selected products such as soaps and sugar where local industry had developed capacity, but suffered from competition posed by cheap imported goods.

Prof Ncube said there was need for Government to ensure local politics did not destroy business as political differences of the last decade resulted in the total collapse of business.