A welcome renaissance for local industry
ZIMBABWEANS’ insatiable appetite for imported goods is well-documented.
So voracious was the appetite that at one time the country spent US$105 million in a year importing chewing gum, toothpicks and diapers. Local industries suffered as a result. Capacity utilisation in industry plummeted to record lows, as goods from South Africa, Mozambique and Zambia flooded local shops.
However, following four years of aggressive reforms, the picture has changed dramatically.
Local industry is on the rebound. The local manufacturing sector appears to have turned the corner, and most shops are jam-packed with locally-produced goods.
President Mnangagwa recently noted this monumental progress in engineering a rapid turnaround of fortunes for the manufacturing sector.
Addressing the Buy Zimbabwe 2022 Public Procurement Conference, President Mnangagwa said: “It is gratifying to note that the various economic reforms being championed by my administration, coupled with the concerted efforts of organisations such as the Buy Zimbabwe Trust, have seen locally-produced goods now dominating shelf spaces.”
To consolidate the emerging trend, he said, the Government will continue “fostering an enabling business environment and availing the requisite support to increase capacity utilisation in our country’s manufacturing sector”.
More than 80 percent of retail goods in shops are locally made, representing a significant rise from 35 percent “a few years ago”.
Experts say the rapid turnaround is a result of a coordinated import substitution programme.
A recent sector survey commissioned by the Confederation of Zimbabwe Industries (CZI) concluded that capacity utilisation in the manufacturing sector rose to 56,5 percent in 2021, up from 47 percent recorded a year before.
Industry capacity utilisation has since grown to 66,6 percent.
Experts have cited factors such as improved availability of foreign currency through the Reserve Bank of
Zimbabwe (RBZ) auction, closure of land borders during the Covid-19-induced lockdowns and reliable power supply as key drivers of this embryonic growth.
Vibrant
Buy Zimbabwe chairperson Mr Munyaradzi Hwengwere indicated that the expansion was also driven by growth in agriculture and mining sectors, two central anchors of the economy.
“Fundamentally, our economy is on the right track because there is increased productivity in the two key sectors — agriculture and mining,” he said.
“The bumper harvests that we have had over the past two years feed our manufacturing sector.
“This, therefore, means the whole value chain, that is wholesalers and retailers, also feed off local produce.”
He added: “These are exciting times indeed for our country and as Buy Zimbabwe, we are happy that what we have always been advocating for is now in motion.”
CZI president Mr Kurai Matsheza commended the Government for putting in place “the right framework”.
He said authorities must continue investing in infrastructure to ensure capacity utilisation continues to grow.
“There is need for continuous and constant disbursement of foreign currency so that we do not stop producing and do not lose skilled workers,” he said.
“We also need to continue investing in infrastructure such as electricity and roads so that we do not face challenges.”
Solid demand
Financials from the country’s major retailers shows that demand for retail goods was still strong.
OK Zimbabwe reported that its outlets were “adequately stocked”, while sales volumes grew by 22,7 percent during the 2021 financial year.
In the same period, Delta Beverages said increased economic activity had boosted demand for its products and sales volumes.
“Aggregate demand remains firm despite the impact of Covid-19, driven by the successful 2021 agricultural season, increased mining output and firmer commodity prices and the spending on infrastructure projects,” the statement said in part.
Data from the Ministry of Industry and Commerce shows increased production in clothing, textiles, food, non-metallic mineral (bricks and cement), pharmaceutical, paper, printing and publishing sectors between 2018 and 2020.
A snap survey in major retail grocery outlets last week indicated local brands such as Blue Ribbon, Gloria and Red Seal dominate the flour sections, while Puredrop, ZimGold and Raha have the bulk of products in the cooking oil sections.
Probrands, National Foods and Mega brands rule the roost in the rice and pasta sections, while Tanganda dominates the teas.
Locally manufactured washing powders, bathing soaps, biscuits, breakfast cereals, tissues and juices are also emerging as strong competition for imported brands.
Job creation
Crucially, heightened capacity utilisation is translating to increased job creation.
Figures from the National Social Security Authority (NSSA) highlight that 479 709 new workers were registered with the statutory social security agency from January 2018 to May 2022.
In 2018, 20 640 new workers registered with NSSA, while an additional 242 998 workers were registered the following year.
New registrants stood at 78 409 in 2020 before rising to 121 145 in 2021.
By May this year, an additional 16 517 new workers had been registered.
Export boom
Significant growth in export volumes and revenue have also been recorded.
According to ZimTrade, the country recorded a 39 percent export growth between January and April this year, compared to the same period last year.
Sugar export revenue grew from US$1,4 million during the first quarter of last year to US$8,2 million during the same period this year.
Export revenue from baked products increased from US$1,8 million to US$2,2 million over the same period.
Leather and leather products exports increased by 35,5 percent from US$626 000 to US$849 000 during the period under review.
Exports of hides and skins also grew by 44,67 percent from US$4 million between January and April last year to US$5,8 million over the same period this year.
Exports from the packaging and stationery sector recorded a huge jump during the period under review from US$2,4 million in April 2021 to US$5,7 million in 2022.
ZimTrade noted that an overwhelming percentage of imports consisted of raw materials and machinery which are being directed towards boosting local production.
Headwinds
Mr Hwengwere, however, said the growth trajectory faces significant headwinds from unreasonable pricing of locally manufactured products.
“If we overprice our goods, people may be forced to continue looking at imports as alternatives,” he warned.
Authorities, he said, must draw up a framework to encourage fair pricing.
“Government has the buying power for almost 68 percent of local products.
This makes it the biggest buyer. Thus, come up with a framework that brings Government can use this as leverage to price equity.”