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Bianca Mlilo, Business Reporter
THE strengthening of the United States dollar against regional currencies has become a major threat to exports with giant cement maker, Pretoria Portland Cement (PPC), becoming the latest casualty.
Zimbabwe adopted the multiple currency system in 2009 with the US$ as the major currency alongside the rand, the pula and other international currencies.
PPC Zimbabwe Limited managing director, Kelibone Masiyane, said the giant firm has recorded a decline in business due to an influx of imports as a result of the stronger dollar.
He told Business Chronicle in an interview that cheap imports were killing local businesses and eroding export earnings. “We’re under serious threat from imports mainly because we’re operating within a dollarised environment. Regional currencies like the South African rand and the Zambian kwacha are down and everything manufactured under those currencies is cheaper compared to our local products,” said Masiyane.
“So, that makes our products expensive and running a business has become extremely difficult. We’re not against competition but we would like that competition to take place on a level playing field.”
Masiyane said electricity costs were cheaper in other countries compared to Zimbabwe, which increases the cost of production.
This, he said, means Zimbabwe’s cement industry will produce at a higher cost and sell at a higher price, which will repel consumers who are looking for products that are easier on their pockets.
Masiyane warned that any increase in electricity tariffs would completely destroy the manufacturing base in Zimbabwe whose average capacity utilisation has dropped to 34 percent.
He said capacity utilisation in the cement industry has already dropped drastically from 70 percent in 2014 to 58 percent this year.
Masiyane said electricity and diesel, which are their major cost drivers, were expensive forcing producers to extend the burden to the customer in the form of pricing.
“In 2014 we exported about 100,000 tonnes of cement while last year we exported next to nothing, which is also a result of the exchange rate. This indicates that Zimbabwe has been rendered practically uncompetitive in the export markets,” he explained.
“This is why we’re in full support of the Buy Zimbabwe Campaign which we believe will revive the manufacturing base. We’re not being cry-babies by asking the government for protection, we’re doing so because we’re committed to manufacturing in our country.
“The economy is vulnerable and certain steps need to be taken to allow businesses to continue to thrive because when companies fold they lose their manufacturing capability and government loses money in terms of taxes.”
In the 2016 monetary policy statement, Reserve bank of Zimbabwe governor, John Mangudya, alluded to the challenges of a strengthening dollar following the US interest rate hike.
“The anticipated strengthening of the US dollar emanating from the interest rate hike will potentially result in a further slowdown in prices of commodities that act as safe investment havens, notably gold and platinum,” he said.
“The decline in the price of these precious metals will further dampen export receipts, a development that has an undermining effect on domestic liquidity conditions and economic growth prospects at large.”
Masiyane said PPC Zimbabwe recently retrenched 50 workers in the aftermath of the 2015 Supreme Court ruling that allowed employers to terminate employees’ contracts on three months’ notice.
“The technological advancements within our company and multi-skilling initiatives that we undertook have inevitably resulted in redundancies being created throughout the business. Although we had to let go of some of our workers, I’m glad to say we offered them an attractive package that is significantly above the legislated minimum package, which makes us proud as a company because it shows that we care,” said Masiyane.
He said although times were tough, PPC Zimbabwe has a strategy as a business to take the company forward and believes there is no insurmountable challenge.
Online Reporter