HARARE – Zimbabwe’s industry representative body, Confederation of Zimbabwe Industries (CZI) is expecting capacity utilisation in the manufacturing sector to decline this year from 48 percent recorded in August 2018 as rising costs of production and foreign currency shortages, among other challenges continue to take a toll on industry.
The development comes at a time when companies are facing operational challenges due to liquidity constraints.
CZI president Sifelani Jabangwe indicated that the continuous failure to access forex by companies will result in negative effects on the country’s economy.
“Given the crippling forex challenges and rising cost of doing business, the country’s capacity utilisation is likely to go down from the current 48 percent. And we don’t wish for such a development to persist .
“However, if the monetary authorities fund the producing companies or provide funds to produce the capacity utilisation is likely to be maintained .If companies get funding the recovery is likely to take place in the third and fourth quarter,” said Jabangwe.
Analysts believe that Zimbabwe’s cost structure should be addressed as it affects final product costs and render Zimbabwean exports uncompetitive, affecting foreign currency, among others.
The fall of capacity utilisation is likely going to be worsened by El Nino induced drought and closure of companies due to volatility in the country.
Drought means companies will rely much on imports which will need elusive forex to bring critical raw materials.
In the latest CZI survey the cost or shortage of raw materials weighed down on capacity utilisation by a magnitude 19,59 percent, while low demand came second at 17,18 percent.
Economist Gift Mugano said the government should take advantage of the existing water bodies to grow more raw materials for the manufacturing sector as it will save forex.
“Since government is facing challenges in accessing forex for raw materials, there is need to grow them in high potential areas using irrigation facilities to ensure the manufacturing industry gets its raw materials.
“Irrigation will shield the crops from the vagaries of the weather that the SADC region is experiencing,” said Mugano.
Of late, the manufacturing sector has raised concern over the depletion of nostro account balances resulting in delays in accessing critical raw materials required by the manufacturing sector.