Business calls for currency devaluation as confidence sinks

THE CONTINUED fluctuation in the rand is hurting Zimbabwean manufacturers, prompting them to call for internal devaluation of the US dollar after the first manufacturing confidence index showed confidence in the industry at a lowly negative 33 percent.

Zimbabwe has apparently become a warehouse for goods produced in other countries, mainly from South Africa, Malawi, Zambia and China, despite lobby efforts to promote local producers.

Manufacturers in Zimbabwe are struggling against a heavy saddle of power outages, high electricity tariffs and other costs, as well as expensive borrowing on the local market.

Busisa Moyo, the president of the Confederation of Zimbabwe Industries (CZI), said in Harare yesterday that the prices of products produced in Zimbabwe “are a reflection of the Zimbabwean environment”.

Local products costly

Locally produced products like cooking oil, margarine and others are highly priced compared with those imported from South Africa, a development that has fuelled massive growth of the informal sector.

“Confidence is at minus 33.1 percent quarter on quarter. It is a negative sentiment and a distress call that everything is not well,” Moyo said.

Manufacturers, he said, were suffering from a high-cost environment, while currency woes were also affecting the industry.

Electricity is among the major cost drivers for businesses in the country, even after the government asked industries and miners to cut usage by 25 percent to help manage dwindling supply and rising demand.

“The impact of the 25 percent reduction in usage is negative,” said Moyo.

Manufacturers have been blamed for not satisfying local demand by retailers, who are in turn accused by the government of stocking imported stock.

Albert Katsande, the chief operating officer of OK Zimbabwe, which competes against Pick n Pay, said: “A higher percentage of imports (in supermarkets) are aimed at the higher end of the market than the bottom end.”

He said: “capacity utilisation for most local suppliers and manufacturers is challenged and compromised” with issues ranging from consistency to quality and pricing.

Imports banned

Capacity utilisation in industry and manufacturing has sagged to below 38 percent and industrialists say it will worsen as the country’s economic woes mount.

Zimbabwe has banned the import of cooking oil, sugar, poultry and maize meal. This has attracted criticism that the government and lobby groups in the country are pushing through a protectionist agenda though officials refute this.

Companies complain of a high tax regime in Zimbabwe, and they want the government to fix issues around protection of investments, as well as restore certainty to the operating and regulatory frameworks.