Manufacturing sector faces gloomy 2014

Zimbabwe’s manufacturing sector faces a gloomy 2014 because there is little prospect of changes in the operational environment, the Confederation of Zimbabwe Industries has said.

Zimbabwean supermarket shelves are dominated by South African made goods.

Zimbabwean supermarket shelves are dominated by South African made goods.

CZI president Charles Msipa told The Zimbabwean that people should expect “more of the same” since the factors that had resulted in the current depressed atmosphere were going to take time to address.

“Of the things that have contributed to where we are today very little has changed. Our industrial capacity utilisation is down. We still have problems with access to and affordability of capital,” he said.

According to the CZI manufacturing sector survey report for 2013, capacity utilisation in the sector plunged to 39.6 per cent from 44 per cent in 2012. Msipa, launching the report at the time, said that this showed that manufacturing was in the intensive care unit and in need of help.

The survey also showed that, for local manufacturers, competitiveness was diminishing with South Africa as the biggest competitor and China coming in second.

“Electricity outages continue to disrupt production while liquidity constraints have led to reduced demand for consumer goods,” Msipa added.

Zimbabwe currently has a total generation capacity of 1,530MW against a demand of 2,200MW.

Compounding these woes, the country’s sole power supplier ZESA Holdings recently reported current liabilities of $944.9m, far outstripping its current assets by $479m, implying that the company may not be able to meet its liabilities as they fall due.

“I don’t see any overnight change. It’s not a one-day wonder. It’s going to take time to attract capital flow and stabilise electricity supply.”

Msipa said the nature of the problems meant that any change would take longer than desired.

“I don’t see any overnight change. It’s not a one-day wonder. It’s going to take time to attract capital flow and stabilise electricity supply,” he said.

“It will be more of the same, particularly for the first half of 2014”. Msipa said efforts to help resuscitate industries may only begin to bear fruit in the second half of the year.

On indigenization, Msipa said that government should be clear to investors.

“What I hear investors saying is that they want the policy clearly spelt out. It seems it hasn’t always been applied with consistency,” he said.

He added that government would also need to apply the policy with flexibility. “There will be need in some sectors for greater flexibility based on our need to attract capital.”

Msipa also said he was concerned by problems in the banking sector, noting the fragility of the national economy. The Central Bank recently cancelled Trust Bank’s operating licence and some banks, particularly locally owned ones, had been struggling to meet clients’ cash demands.

The Reserve Bank withdrew Trust Bank’s licence over allegations of abuse of depositors’ funds and violation of the Banking Act, saying the bank was undercapitalised with core capital of $1.9m.

Under the central bank’s requirements, commercial banks are required to be capitalised to the tune of $75m by the end of this month and $100m by June 2014.

“The economy is an ecosystem. It’s all interdependent,” he said. “When we have instability in the banking sector it can potentially affect the whole economy and the systemic risk will affect business, but I am confident that the Central Bank is addressing those issues.”

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