CZI forecasts slump in capacity utilisation

Published: 19 July 2013

THE Confederation of Zimbabwe Industries has forecast a further decline in capacity utilisation this year, as manufacturing companies remain under pressure from tight liquidity and competition from low-priced imports.

Last year, the industrial lobby group reported capacity utilisation for manufacturers declined from 57 percent in 2011 to 44 percent, the first time since the country adopted the multi-currency system is 2009.

"We are conducting a survey to measure and assess capacity utilisation for 2013 and we think that it will have declined even further," said CZI president Mr Charles Msipa in an interview with Star FM.

"The issues pertaining to this are to do with lack of access to capital, that has been one issue that has affected a lot of industries and I should stress that it is not a consistent picture throughout.

"There are many industries that have suffered a very low capacity utilisation because they have not been able to access capital for their raw materials for one reason or the other but there are some, particularly in food and beverages sector that have also been able to access capital and that have increased their capacity utilisation. But broadly I would say that, yes, capital has been a major challenge for the past four years since the introduction of trading in multiple currencies."

The manufacturing production is only 60 percent of its 1980 levels while the output is lower than in the late 1960s, economists say. The country is now importing the bulk of basic commodities because local companies cannot meet demand

"Zimbabwe is a serial over-consumer and demand spills over into imports. It has become a high-cost, low- productivity economy that attracts imports and undermines export competitiveness," one economist said.

Poor performance of the agricultural sector has also led to a stagnant growth in the manufacturing sector.

This is particularly so because almost 70 percent of industrial raw materials come from the agricultural sector. Since 2009, investment into the manufacturing sector has remained subdued, with only 17 percent of local companies managing to secure investments, the Finance Ministry said last year.

According to the CZI, about US$2 billion is needed to revive industry. Between 60 and 70 percent will be required for new equipment while the remainder would be for working capital, Mr Msipa said. Low capacity utilisation has also massive triggered retrenchment.

"Since I don't have the exact figures of the numbers of people who have been retrenched in the last four years I think there is a Retrenchment Board in the Ministry of Labour that may have more reliable statistics, but I would say that . . . an estimated 30 percent have been retrenched in the past year," said Mr Msipa.
- herald

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