Business Briefs with Clemence Machadu

Mining indaba on cards

The fifth edition of the Mining and Infrastructure Indaba is set to be held from 25 to 27 September.

Running under the theme: Redefining Africa – Harnessing our resources collectively, the conference is being facilitated and promoted by Utho Capital.

The conference will discuss topical issues, which include: Showcasing developments over the past five years, Why financing is still so elusive, Building sustainable communities through mining, and rules of engagement in mining in Africa.

Toll production criticised

The last few months has seen many companies closing down their plants and resorting to contracting other countries to produce on their behalf. This has been highly criticised by a senior bureaucrat from the ministry of industry and commerce, who preferred anonymity.

“This process is called toll production. Dairibord has recently done that, by engaging a South African company to produce cartonised Chimombe milk. But that has resulted in the company commencing a rationalisation exercise which also involves retrenchment of employees. Toll manufacturing should be stopped, it kills jobs,” said the bureaucrat.

He added that toll manufacturing resulted in the export of jobs to other countries and will fuel the already high unemployment, if not stopped.

“Of course it results in cheaper products. But how will consumers who would have lost their jobs afford to buy the goods? Where will they get the money?” he added.

Remove steel

The listing of steel as a mineral by government has been castigated by steel manufacturers, who are arguing that steel goes through many processes of manufacturing and therefore cannot be listed as a mineral.

The Minerals Marketing Corporation of Zimbabwe is responsible for marketing and monitoring the exports of all minerals produced (including steel), and it takes 0.975 percent commission for doing that.

Steel manufacturers are worried that MMCZ cannot effectively and competitively market their products, as state enterprises are known for their inefficiency and corruption. “If steel is lifted from MMCZ’s mineral list, we would be able to identify our own attractive markets and negotiate our own deals,” said one steel manufacturer.

Companies seek protection

Many manufacturing companies are approaching the ministry of industry and commerce to seek tariff protection and continued implementation of surtax, in their efforts to remain alive.

Confederation of Zimbabwe Industries chief economist, Lorraine Chikanya, explained that the manufacturing industry growth was going down as a result of falling domestic demand, caused by strong competition from imports.

“Players in the sector are still failing to access suitable working capital, as the current tenure and interest rates are not favourable,” she said. Some of the sectors that have requested protection, as they feel that they have the capacity to meet local demand, include refrigeration and oils and fats.

Average capacity utilisation in the manufacturing sector slumped last year by 13 percent and it is projected to fall again this year.

Comesa boost

Zimbabwe’s private sector is set for a major boost following the signing of a development agreement between COMESA and the African Management Services Company. The agreement will see AMSCO providing training programmes to strengthen project support for private sector development in COMESA members.

The lack of skills among entrepreneurs in SMEs had adversely affected the achievement of the standards that the market requires. About 60 percent of Zimbabwe’s business sector is in the SME category. COMESA indicated that the private sector needs to get more involved during the tripartite negotiations for the Free Trade Area. AMSCO will design and implement private sector development and poverty reduction programmes on a thematic basis.

Transport costs huge

Zimbabwe incurs more transport cost for transporting the same amount of goods than any other country in the region.

A study conducted by the African Development Bank estimated that the average road transport cost in Zimbabwe is $0.10 per tonne per km, while the regional average is $0.04 per tonne per km.

Transport is an essential part of commerce as nothing produced can be distributed without it.

Transport costs are added to the cost of production. It is therefore necessary to keep them as low as possible, to ensure that goods are competitively priced.

Most of our roads were constructed in the 1960s, and the design life for roads is 20 years. It costs $1.5 million per km to construct a road, and about 8,000 kms need to be built in Zimbabwe.

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