Zimbabwe’s manufacturing firms have significant scope to unlock growth by strategically utilising idle capacity, with supportive Government interventions increasingly creating a more enabling environment for industrial expansion, an industrial lobby group has said.
In its report titled “Capacity in the Manufacturing Sector, Exploiting untapped Opportunities”, the Confederation of Zimbabwe Industries (CZI) said evidence from 2020 to 2024 shows that manufacturing firms have stabilised at an average capacity utilisation level of about 55 percent, implying idle capacity of roughly 45 percent.
Industry capacity utilisation is also projected to remain at 55 percent for the full year 2025.
However, the report notes that the sector has reached a point beyond which further gains require deliberate firm-level strategies combined with targeted policy support.
CZI senior economist Dr Carren Pindiriri, in the report, said the persistence of unused capacity should be viewed not only as a constraint but also as a major opportunity for industrial growth, employment creation and fiscal expansion.
“With existing plant and machinery already in place, firms can raise output significantly without incurring the full costs of new investment, provided the operating environment continues to improve,” he said.
He noted that one practical pathway for firms was to focus on reducing production costs as a foundation for expanding output.
“Lower costs improve competitiveness, enable firms to price products more attractively and stimulate demand in both domestic and export markets. As output rises, fixed costs such as rent, maintenance, depreciation and insurance are spread over a larger production base, reinforcing economies of scale and further lowering unit costs,” said Dr Pindiri.
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The CZI report also highlights that high idle capacity currently inflates fixed costs per unit of output, but this challenge can be reversed through improved utilisation.
“For firms that had installed capacity primarily to serve export markets, better cost structures would allow them to take advantage of existing regional and continental opportunities, particularly under the African Continental Free Trade Area (AfCFTA),” reads part of the report.
Firms are also encouraged to align production schedules more closely with stable demand segments, diversify product lines and strengthen linkages with local value chains.
Dr Pindiri said by improving operational efficiency and market responsiveness, manufacturers can incrementally raise utilisation levels without overstretching working capital or exposing themselves to excessive risk.
CZI underscored that Government policy intervention plays a decisive role in enabling firms to move in that direction.
Dr Pindiriri noted that ongoing regulatory reforms are already helping to lower the cost of doing business and improve predictability, which is essential for production planning and capacity expansion.
He said the introduction of 24-hour production tax incentives for manufacturing firms in the 2026 National Budget was designed to encourage continuous production, improve asset utilisation and lower average costs, directly supporting higher capacity utilisation across the sector.
In addition, CZI said a carefully calibrated reduction in certain charges can significantly reduce production costs and enhance the competitiveness of domestic manufacturers relative to regional peers, but importantly, such reforms need not undermine government revenues.
“Reductions in certain taxes and fees could be offset by higher output and increased revenue from output-based taxes such as value-added tax (VAT),” Dr Pindiriri said.
He noted that in countries with low levels of idle capacity, such as China, where unutilised capacity is below 26 percent, a 1 percent reduction in taxes or fees is associated with a 0.6 percent reduction in idle capacity.
In Zimbabwe’s context, where idle capacity is substantially higher, he suggested that similar tax and fee adjustments could yield even larger gains in utilisation and potentially generate net fiscal benefits for the State.
Beyond regulatory and fiscal measures, CZI highlighted the importance of sustaining macroeconomic stability as a foundation for improved capacity utilisation.
It said stable prices and exchange rate conditions enhance business confidence, facilitate access to foreign currency and support smoother procurement of raw materials and spare parts.
CZI also highlighted that ensuring an uninterrupted supply of electricity was identified as a critical medium- to long-term priority, as this enabled firms to operate production lines consistently, reduce downtime and make full use of installed machinery, directly translating into higher utilisation rates and improved productivity.-herald
