Industry bullish on 2021

ZIMBABWE’S manufacturing sector expects above 61 percent capacity utilisation this year after registering 10,6 percentage point growth to 47 percent last year, as local companies remain resilient to shocks induced by the Covid-19 pandemic.

The Confederation of Zimbabwe Industries (CZI) revealed this yesterday during the launch of the 2020 manufacturing sector survey results.

Capacity utilisation is a key statistic derived from the survey and greatly informs the country’s industrial performance.

Presenting the 2020 manufacturing sector survey findings yesterday CZI chief economist, Mrs Tafadzwa Bandama, said there was a silver lining within the country’s manufacturing sector and projected that capacity utilisation would likely jump to 60 percent by the end of the year.

“I would like to highlight that we are emerging but we are not yet there. We are still below 50 percent of capacity utilisation, although capacity utilisation improved from 36,4 percent in 2019 to 47 percent in 2020,” she said.

“This is a low output medium and this is why we say the increase from 36,4 percent to 47 percent in capacity utilisation are green shoots in capacity utilisation performance in a low output medium because we did not manage to overshoot the 50 percent mark.”

CZI conducted the survey in industrial sectors that include food stuffs, beverages, transport and equipment, non-metallic minerals, clothing and footwear, tobacco and chemicals.

“Industry is hoping and projecting to increase capacity utilisation to 61 percent in 2021. To achieve this 61 percent, they (companies) are asking for a consistent policy environment, exchange rate stability, price stability in the goods market as well as the services market. They are also asking the Government to incentivise the local content policy,” said Mrs Bandama.

Going forward, CZI said it was imperative to foster competitiveness in the economy to stimulate exports by improving the business environment. Industry leaders are calling for an inclusive and aggressive Covid-19 vaccination programme to ensure the disease is dealt with to allow industrial operations to revert to normal.

“Competition from imports as well as transport, which was grounded in 2020 due to the national lockdowns, were some of the challenges that companies faced as we tried to combat the Covid-19 pandemic,” said Mrs Bandama.

“Companies indicated that foreign currency, although the intensity of the challenge reduced, it still a challenge.”

CZI said the fixed exchange rate in the first half of 2020 worsened the plight of companies until the Reserve Bank of Zimbabwe (RBZ) introduced the weekly Foreign Currency Auction Trading System in June, which has been credited for instilling price stability.

As a result, a total of US$795 million had been allotted to the productive sector since the introduction of the weekly forex auction system. A significant proportion of the amount was earmarked for strategic sectors to import essential goods, particularly raw materials, equipment, pharmaceuticals, fuel, chemicals and electricity.

Mrs Bandama said the discovery of a market-based exchange rate implies that pricing distortions in the market, especially the indexation of prices to parallel market exchange rate, has been minimised.

“The introduction of the market-based exchange rate at the auction system assisted in dampening inflation pressures in the economy,” she said.

“It also assisted in the acquisition of raw materials and equipment hence assisting in the improvement of capacity utilisation by companies.

“Although we are still operating three-digit levels for year-on-year inflation and single digit for month-on-month, due to Covid-19, companies lost revenue as the country was placed on national lockdowns and could not sell their commodities.”–herald.cl.zw