Average industrial capacity utilisation has fallen from 44 per cent last year to 39.6 per cent, and has been falling in the manufacturing sector since 2011 when it stood at 57.3 per cent. The sector’s real growth is projected to be a paltry 1.5 per cent this year.
Capacity utilisation is an important economic indicator as it reflects our output gap. Zimbabwe’s potential can be easily seen in what we are currently producing, measured against what we can produce.
The falling of capacity use to 39.6 percent shows how we are annually retreating backwards from achieving our potential output, which is the maximum of goods our economy can turn out. It means that companies have closed down or reduced their operations, resulting in falling production, retrenchment of workers and reduced incomes, leading in turn to low demand for products.
Zimbabwe’s labour laws are not only inflexible, they also favour the worker. A worker who loses her or his job as a result of a company’s rationalisation exercise will approach the courts and get a huge award, sometimes running into hundreds of thousands of dollars. This milks the company of the little working capital it has, adds to the already high cost of production and affects the competitiveness of the product it makes. So what is causing this cancer in our industry? The major challenge is lack of funding to channel towards working capital requirements, given the serious liquidity crunch we are facing. Others include stiff competition from cheaper imports, use of antiquated and obsolete machinery, lack of raw materials and high utility tariffs.
The solution for fostering a manufacturing renaissance is contained in the Industrialisation Development Policy (IDP) and National Trade Policy (NTP) launched last year. The IDP proposes concrete strategies, including promotion of value addition, protection of industries and creation of an industrial bank. If we know the problems facing the industry and have the solution, why then is our industry shrinking?
Our problem is our impotency to implement policies. We are good at talking the walk instead of walking the talk. The IDP and NTP have barely been touched, despite the fact that some of the strategies in these policies don’t need a single dime to implement.
Our manufacturing sector is a sleeping giant that has the potential to turn around the fortunes of our economy, providing its challenges are seriously given attention. We have high unemployment at 85 per cent, an unsustainable external debt of 114 per cent of GDP, a projected trade deficit of $4bn and a looming budget deficit – all macroeconomic fundamentals that could be dealt with by waking that sleeping giant.
The new minister of industry and commerce, Mike Bimha, should seriously pursue the implementation of the IDP and NTP. I strongly feel that the legislature should also have concrete oversight over these two policies, with real time monitoring and evaluation.
Our deepening manufacturing blues are an issue for government, labour and the private sector, and the solutions lie within themselves.Post published in: Business