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Oliver Kazunga, Senior Business Reporter
LOCAL textile companies have suspended exports to South Africa due to the depreciation of the rand, the Zimbabwe Textile Manufacturers’ Association has said.
The South African rand has been on a steady slide against the United States dollar in the wake of internal and external economic pressures that have weighed down on the neighbouring country’s economy.
ZITMA vice chairman Freedom Dube told Business Chronicle that as a result of suspension of exports, some of their members have introduced short-time working periods.
“Some of our members have suspended exports due to the depreciation of the rand against the United States dollar and most of our customers still insist that we should charge old prices,” he said.
“As a result, short-time working arrangements have become a tool for local textile firms to remain operational with capacity utilisation going down to around 30 percent.”
The rand has retreated from a 1:10 ratio in the last few years to the greenback to 1:15 as of yesterday.
Since Zimbabwe is using a strong currency, the weakening of the rand and other regional currencies means that exports have become more expensive compared to cheap imports.
The situation has been compounded by high production costs locally, which further erode earnings in a squeezed domestic market.
Dube said South Africa has been a strong market for the local textile industry as exports were constantly on demand.
“Currently, the local textile industry employs less than 5,000 people and we’re afraid that the figure might shrink further due to low production levels,” he said.
At its peak the textile industry employed about 30,000 workers.
Since the liberalisation of the economy in February 2009, the textile industry has not been spared from the challenges that have been affecting the local manufacturing sector at large.
The challenges facing the textile industry are mainly working capital and subdued aggregate demand due to issues of liquidity, stiff competition, and obsolete equipment, said Dube.
Over the years, players in the clothing and textile industry have complained about the influx of cheap imported products from South Africa and the Far East.
According to the Confederation of Zimbabwe Industries (CZI), capacity utilisation in the manufacturing sector has been on the lower side due to operational constraints such as lack of access to financing, obsolete equipment and stiff competition from imported products.
Against this background, capacity utilisation in industry last year declined to 34,3 percent from 36,5 percent in 2014.
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