Modest growth expected for manufacturing sector

back of strong recovery of the agricultural sector, a research firm has said.
Over the past decade, the manufacturing sector declined, largely due to low farm output.
The industry requires at least 60 percent of its inputs from the agriculture sector.
The undesired consequences of the land reform programme and successive years of drought affected agriculture, once the mainstay of the economy.
This saw the manufacturing sector contracting by between 50 and 60 percent between 2000 and 2008, according to estimates.
In its 2011 Economic Outlook for Zimbabwe, Renaissance Capital noted that the strong recovery in the agricultural sector would have some positive impact on manufacturing.
“The upside for the manufacturing sector in 2011 is the strong recovery of the agriculture sector,” said RenCap.
“It also cited the Reserve Bank of Zimbabwe which has projected the manufacturing sector would expand by 5,7 percent on continued improvements in the agricultural sector.
“Agriculture’s stellar recovery in 2009 and 2010 is favourable for the performance of the manufacturing sector,” it said.
The increase in the manufacturing sector’s capacity utilisation to 43,7 percent in the first half of 2010 was a testimony that the sector was on a rebound. Last year, the manufacturing sector grew only 2,7 percent, said the report.
The agriculture sector, which accounts for one fifth of GDP, grew a remarkable 34 percent in 2010, from 15 percent in 2009.
The recovery is partly due to the liberalisation of the economy in early 2009. But it is also attributable to investments by the central bank during the years when it became involved in quasi-fiscal activities, according to the RenCap report.
Both food and cash crops exhibited strong growth in 2009 and 2010. The acreage under maize, used to produce Zimbabwe’s staple food, increased to 660 000 hectares at the end of 2010, from 530 000 ha a year earlier.
But the 2011 outlook for maize production has been clouded by an outbreak of armyworm in maize-growing areas.
This was also compounded by a dry spell, which hit most parts of the country during the past few weeks.
“The performance of the agriculture sector in 2011 will thus depend on cash crops. Tobacco is the biggest cash crop in value terms,” said the report.
Tobacco accounts for 40 percent of earnings from agricultural exports. It is projected that output would increase to between 170 million and 200 million kg this year from 123 million kg in 2010, mainly on the back of greater land use.
Last year 65 000 ha of land was put under tobacco, of which two-thirds was under contract. The authorities’ projection of an expansion of tobacco production in 2011 is premised on expectation that 100 000 ha of land will be put under tobacco.
Cotton production is projected to grow 15 percent in 2011 to 300 000 tonnes, on the back of the greater availability of financing and marketing arrangements, and firmer prices.
The rehabilitation of infrastructure in sugar-producing areas is expected to boost sugar production by 30 percent to 450 000 tonnes, particularly in the Triangle and Hippo Valley areas.
RenCap also said the stronger rand would subdue demand for SA imports.
It said producers might use this as an opportunity to increase “the shelf space allocated to their output by local retailers”.