Capacity in industry primed to rise to 50pc: Msipa

12 Oct, 2014 - 09:10 0 Views

The Sunday Mail

CONFEDERATION of Zimbabwe Industries (CZI) president Mr Charles Msipa has shown an unusual sense of optimism, predicting capacity in industry will rebound to above 50 percent in 2015 after this year’s figures indicated that capacity utilisation declined less than forecasted.

Experts hope that the continued recovery in sub-sectors such as clothing, oil processing, food and beverages will spur capacity to over 50 percent.

“We expect the sub-sectors that are presently doing well to keep improving and move the total average (capacity utilisation) into the 50s,” Mr Msipa told The Sunday Mail Business in an interview during last week’s launch of the 2014 manufacturing sector survey report in Harare.

CZI reported Wednesday that manufacturing industry capacity has dropped to 36,3 percent this year from 39,4 percent in 2013, weighed by weak consumer demand, high production costs and working capital limitations.

Market watchers had earlier estimated that capacity would drop to just over 30 percent on low output across the country’s major economic sectors.

Government has since downwardly revised local economic growth forecasts from 6,1 percent to 3,1 percent.

“Generally, I had to deal with exposure to issues that are a handicap to the growth of the manufacturing sector and the economy. So, I expected average capacity utilisation to be worse than this. But, this (outcome) is based on an empirical study of the real situation at hand,” Mr Msipa said.

According to the latest CZI State of the Manufacturing Sector Survey annual report, 47 percent of the companies surveyed believe that the economy will go into a recession in the next 12 months. At least 30 percent said there will be slight growth, while 19 percent saw the economy growing moderately.

Only 4 percent were convinced of outright economic growth.

CZI said over 80 percent of the respondents indicated Zimbabwe would likely remain in a deflationary mode due to lack of capital inflows, liquidity constraints and low domestic demand.

The continued import of finished goods against low capacity utilisation, obsolete equipment and weakening of the South African rand against the US dollar is expected to continue to stymie economic growth.

South Africa remains Zimbabwe’s biggest trade partner.

Industrial production has been progressively declining from 70 percent realised in 1994 to 57 percent recorded in 2010. Capacity, however, bottomed out at 10 percent in 2008.

Chairperson of the Zimbabwe Clothing Manufacturers Association Mr Jeremy Youmans said in an interview last week they expected average industry capacity to decline.

“In clothing, capacity is currently 50 percent, but we have started to implement initiatives that we expect to improve production, although the growth may be slower,” said Mr Youmans. Food and beverage manufacturers have this year “went out of their way” to borrow and buy new plant and machinery, which has lifted production, said Industry and Commerce Minister Mr Mike Bimha at the launch.

“This shows us that we can do it (improve capacity),” he said, adding “we have also seen similar success stories in oil processors, bakeries and others.” Last year, Mr Bimha told the CZI annual conference in Bulawayo that Government was committed to increasing industrial productivity through the implementation of a comphrensive industrial rescue plan, which has already been finalised.

He said the plan will eliminate most of the current ineffiencies suffocating industrial productivity, such as liquidity constraints, power and water shortages as well as the unfair competition posed by both sub-standard and cheap imports.

Industry wants Government to boost manufacturing through value addition, revision of labour laws, revision of tax regulations that put off potential investors and the establishment of anti-dumping tariffs.

The CZI report analyses companies, sector by sector, their performance, challenges and capacity utilisation.

The survey provides insight into the economy from the business perspective. It gives a more accurate portrayal of the current and prospective health of the country’s economic and business environment.

A strong, competitive and diversified manufacturing sector is vital for the country.

A competitive industry can lower costs and prices, create new products and improve quality; thus, contributing to economic stability and job creation.

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