The Sunday Mail
LOCAL industrialists are confident that capacity utilisation will rise significantly if the liquidity situation improves and Government ensures policy predictability.
Last year, Finance and Economic Development Minister Mr Patrick Chinamasa forecast that the economy would grow to 3,2 percent this year from the projected 3,1 percent.
The manufacturing sector is expected to register a marginal 1,7 percent growth on sustained implementation of supportive policy interventions such as promoting competitiveness of the domestic industry through reviewing of import tariffs for selected sectors such as motor industries, beverages, agricultural commodities, clothing industry, leather industry and the mobilisation of affordable lines of credit for re-equipment and re-tooling.
The 2014 Confederation of Zimbabwe Industries (CZI) Manufacturing Sector Survey revealed that capacity utilisation retreated to 36,3 percent from the prior year’s 39,4 percent due to waning consumer demand, pressure from imports, working capital constraints, antiquated plant and machinery and inflexible labour laws.
CZI president Mr Charles Msipa said there is need to address the drivers of low capacity utilisation, which include infrastructure bottlenecks, higher labour costs (including redundancy payments), the higher cost of doing business and limited availability and higher interest rates on borrowings than regional averages.
He said the CZI is happy that Cabinet has approved the establishment of institutional arrangements to address and correct price and cost drivers for local businesses, including “labour law reforms that will introduce efficiencies and promote productivity in the economy”.
“The speed and urgency with which policymakers and private sector act in concert and unison to implement the required reforms in the areas highlighted above in 2015 will determine whether we can restore economic growth and reverse de-industrialisation.
“Numerous enterprises continue to make far-reaching changes in terms of improving efficiencies, innovations in product and packaging to meet changing requirements, headcount rationalisation measures as well as seeking new regional and overseas markets for their products and services.
“It is anticipated that many firms will continue to implement measures that improve their overall competitiveness.
“It should be noted that improvement in agricultural output is critical to the drive to re-industrialise, as many of the outputs from agriculture for raw materials for industry and a significant number of industry players are already invested in contract growing schemes to boost agricultural output,” said Mr Msipa.
Zimbabwe National Chamber of Commerce (ZNCC) Mr Davison Norupiri believes some of the challenges besetting production such as the influx of cheap imports have been addressed, setting the stage for a rise in capacity utilisation.
“We engaged Government over the need to ban imports after we had continuously complained that imports were leading to the erosion of our market share.
“Government has already played its part and some local companies, especially those involved in cooking oil production, are already benefiting from the interventions and have increased production.
“Almost all companies in the oil sector have increased capacity utilisation and for those that are not doing well, it is only because of issues at the respective companies not related to Government because it has played its part.
“We are therefore anticipating a brighter future; moreso, when one factors in media reports about the reforms of the indigenisation and empowerment regulations. The reforms will bring clarity to the empowerment law and I am sure most investors who were sceptical about investing in Zimbabwe will be keen to see the reforms and gladly come to invest.
“So, we strongly feel 2015 will be a good year for industry, more importantly, because the country has been blessed with adequate rains this cropping season.”
Agriculture, which contributes about 60 percent of raw materials to the manufacturing sector, is seen as the backbone of the economy and the anticipated positive performance of the sector is expected to enhance activity in manufacturing sub-sectors such as foodstuffs, beverages, tobacco, and cotton and clothing, and leather industry.
Grain Millers Association of Zimbabwe chairman Mr Tafadzwa Musarara also believes capacity utilisation will rise on improved policy consistency.
“A rise in capacity utilisation is possible but it will be conditional. If Government continues to implement its policies, especially on reducing imports, that will see us optimising capacity utilisation and improving contract farming.
“When people agree on a certain policy, we want to see that being implemented and not have some corrupt permanent secretary corruptly changing that at night for their benefit.
“People cannot invest on a long-term basis if we have corrupt permanent secretaries that change policies at will to suit their interests,” said Mr Musarara.
CZI and ZNCC continue to call for the redoubling of efforts in luring foreign direct investment (FDI).
Since introduction of the multiple currency system, the country has generally under-performed relative to its regional counterparts in attracting capital inflows and FDI, attracting a paltry US$410 million in 2013 while Mozambique recorded US$2,1 billion.
“It is imperative that we consider the expectations and concerns of prospective investors as we assess, review and develop an enabling environment to attract capital inflows,” explained Mr Msipa.
Market watchers say FDI has a significant and positive impact on market liquidity.
Perceived country risk has subdued FDI, which amounted to US$146,6 million in the first 10 months of 2014 compared to US$311,3 million during the same period in 2013.
This year, FDI is projected to increase by 69 percent from US$349 million to US$591 million on the back of the continued implementation of the ease and cost of doing business reforms and the re-engagement process.
Meanwhile, Mr Musarara said while focus is on boosting capacity in the new year, the Reserve Bank of Zimbabwe must continue to press retailers to review their prices downwards in response to the introduction of bond coins.
“We want to see a reduction of prices this year in line with the coming in of bond coins. But I must say that we have retailers who are being insincere. We all know that prices were rounded up for purposes of convenience when we didn’t have small change, but because prices were rounded up a long time ago, some retailers no longer want to realign their prices.
“They are now enjoying the existing prices, especially on bread. I therefore feel that the RBZ should put in place a working committee involving business to interrogate how prices can be adjusted downwards.
“Business should lead the drive to integrate bond coins into the system so that we avoid a situation where Government deploys security agents or statutory bodies such as the National Incomes and Pricing Commission to monitor prices of goods and services in the country because that will create panic on the market.”
Mr Norupiri also said the RBZ should rein in businesses that “have a tendency to resist reducing prices as is happening with fuel”.
He said because businesses always interact with consumers across the country, they must be involved in the deliberations.
“Other ministries such as Transport (and Infrastructure Development) and Industry (and Commerce) consult businesses when trying to resolve any challenges that might have arisen.
“So the RBZ should engage business to come up with strategies to address the issues so that we take collective responsibility,” said Mr Norupiri.
It is understood that bakers wholesale their bread to retailers at prices ranging from 80c to 90c per loaf and a 10 percent mark-up margin is applied, a loaf must retail between 88c and 99c.
But given that bread is sold at a flat US$1, retailers are raking in about US$300 000 per month, from the estimated one million loaves produced and sold daily.
