Harare’s import curb gets more factories going
Champions of new law point to a ‘jump’ in industrial capacity use in just four months
ZIMBABWE’S minister for industry and commerce, Mike Bimha, is far from celebrating the latest growth figures recorded by the country’s manufacturing sector.
There is, says Bimha, “still a lot more work to be done”.
This suggests that Zimbabwe may go all out in its efforts to turn around a sector that has been hard hit by an influx of cheap imports, the high cost of borrowing and ageing equipment.
Growth in the sector has largely been fuelled by an imports restriction enforced by Harare since July.
In its annual manufacturing sector survey released on Wednesday, the Confederation of Zimbabwe Industries — the largest industry body in the country — says factory capacity utilisation has grown from 34.3% last year to 47.4%.
Capacity utilisation was 57.2% in 2011, 44.2% in 2012, 39.6% in 2013 and 36.3% in 2014.
Harare has yet to indicate if it will extend the imports restriction, which was meant to last for six months, or increase the range of goods from the current 43 products to encourage more growth in the manufacturing sector.
The confederation wants to see capacity utilisation of 65%.
Speaking to Business Times this week, Bimha was coy about what action policymakers would now take, given the success they scored on the back of the imports-restriction law.
“It’s too early to comment because Statutory Instrument 64 of 2016 is not something that was implemented a long time ago. There is an industry committee which is now looking into its impact on industry, and only once they have produced their report can we take action based on it,” he said.
Bimha said the confederation’s report was “encouraging” and showed the government was moving in the right direction.
“But obviously there is a lot of work to do. We need to source more funding for our companies and we must catch up with our peers in the region. There is a lot of funding that is needed; our companies need to re-equip and re-tool so that they become efficient in production,” he said.
“The entire production cycle needs to be looked at, and we need to look at our cost structure so that our industries produce competitive goods. So there is a lot of work that we still need to do.”
Nearly 45% of manufacturers in Zimbabwe use machinery that is older than 20 years.
The country’s manufacturing sector needs $2-billion (R28-billion) for retooling purposes.
Denford Mutashu, president of the Confederation of Zimbabwe Retailers, said given the results achieved so far, it was likely that policymakers would want to keep the new law for some time.
“The policy intervention has been in place for less than four months and the economy has witnessed a jump in capacity by [13 percentage points] . . . Accelerated local production is a sure way of curbing forex leakages while helping to improve the liquidity challenges in the economy,” he said.
“There is a likelihood that the scope will definitely increase and it will be a step in the right direction given the performance of the few areas covered by [the import law].”
However, optimism about the new law is shared by only 20.7% of industry players, according to the confederation of industries’s report.
“This seems to indicate that the overriding concern of industrialists is the uncertain macroeconomic environment.
“This conclusion is supported by the fact that 77.1% of respondents rated policy instability as negative or very negative for the economy,” the report says.
The import law has been the source of a bitter falling out with FALLOUT: Beitbridge border post between Zimbabwe and South Africa has seen little trade between the two countries Pretoria. Zambia, Mozambique and Malawi also accuse Harare of flouting bilateral trade agreements. But the imports restriction has weighed most on South Africa, which enjoyed trade of nearly R26-billion in 2015 and is the source of 70% of Zimbabwe’s imports.
Independent estimates suggest that South African businesses in the border town of Musina could have lost in excess of R100-million in July, after the law was effected.
The law bans the importation of 43 products, among them steel, cement, coffee creamers and camphor cream products.
Importers of these products into Zimbabwe must first apply to the Industry and Commerce Ministry for a permit.
They also must prove that the product they want to import is either in short supply or is unavailable in the country.
Meanwhile, the confederation’s report says that 36% of industrialists believe operating conditions worsened in the past year, while 60% reported zero viability in their businesses in the same period.
“More than 50% of the respondents indicated that it is not easy to access funding or loans from local banks, while another 44% indicated that the financial sector is unresponsive to industry needs,” the report says.
This year’s growth in the manufacturing sector is the highest since President Robert Mugabe was re-elected in 2013.
However, his government is still under immense pressure to stop the economic turmoil, characterised by severe cash shortages, company closures and job losses.
This week, the central bank, as a remedy for the cash crunch, plans to introduce bond notes pegged at par with the US dollar.
Opposition political parties plan protests against the issuance of the bond notes.
Accelerated production is a sure way of curbing forex leakages