Domesticating raw material supply is the way – CZI

THE Confederation of Zimbabwe Industries (CZI) says increased focus must be directed at localising the supply of key raw materials for the manufacturing sector in order to expand domestic capacity utilisation and reduce reliance on imports.

While the country’s manufacturing sector capacity utilisation clocked 66 percent in the fourth quarter of 2021 from 47 percent at the beginning of the year, according to Zimstat, heavy dependence on imported raw materials continues to pile pressure on foreign currency demand, with negative consequences on the exchange rate and the ultimate pricing of goods and services.

In its latest 2022 Annual Economic and Business Outlook report, CZI says its members are ready to work with the Government to substitute imports and ensuring attainment of set industry growth targets.

This comes as the Treasury had projected that the manufacturing sector would grow by at least 5,5 percent this year, a view that is also supported by captains of industry. “In 2022, manufacturing growth is expected to remain positive and firm at 5,5 percent.

To achieve the intended growth target of 5,5 percent, there is need for: macro-economic stability, an efficient and effective foreign exchange market, uninterrupted power supply and policy consistency,” said the industry body.

“The share of locally manufactured goods measured by shelf space have been increasing.

However, there is a growing consensus and effort on localisation and domestication of raw materials for local processing.

“The private sector and Government must be seized with manufacturing for manufacturing. This will unlock massive potential in the economy and improve our balance of trade.”

While noting the difficulty in ascertaining the causality between capacity utilisation and GDP growth, CZI said there was correlation between the two (see graph).

The industry lobby grouping also noted that the productive sector was retooling despite the adverse impact of Covid-19. This was being done largely through the support provided by the Foreign Exchange Auction Market where almost 60-70 percent of the monies allocated to business on the auction are channelled towards raw materials and equipment.

Citing World Bank and the International Monetary Fund positive projections for Zimbabwe’s economic growth expected to be above five percent this year, CZI said these must be buttressed by decisive Government action.

“Growth is expected to strengthen further as the negative impact of Covid-19 subsides, global commodity prices firm and export volumes grow,” it said.

“However, the country has notable risks that need to be managed. These include the risk of drought, power deficit, inflation and currency depreciation and auction market inefficiency.”

The agriculture sector remains critical for the local economy in terms of backward and forward linkages in the market but has been negatively affected by erratic rains in the second half of the season resulting in widespread crop failure.

“Therefore, a drought will disrupt various supply chains and create more demand for foreign currency. Critically, drought will plunge millions into extreme poverty considering the nutrition vulnerabilities,” said CZI.

Government has, however, assured the nation that no one will die of hunger and has already activated its systems to supply grain to needy communities.-The Chronicle