Zimbabwe that has been dubbed a unique market by many due to its resilience to economic shocks, continues with that streak amid a growing number of new companies that are joining the manufacturing sector or expanding their product range despite the challenging operating environment.
The new firms and/or widening of the product range comes at a time when some companies are actually downscaling their operations with some shutting down citing a range of challenges mainly foreign currency shortages and high costs of production.
But a survey conducted by Business Weekly in the last few weeks has revealed that some investors are taking the risk and committing their funds into the manufacturing sector, to explore opportunities that have never been considered by others or to take advantage of traditional firms that have slashed production.
The new companies are in cooking oil manufacturing, beverages, sanitary pads and bath soap.
President of the Confederation of Zimbabwe Industries (CZI), the country’s biggest industry representative body, Sifelani Jabangwe, told Business Weekly that there “is a lot” of activity in the manufacturing sector.
Jabangwe said the positive measures announced by Reserve Bank of Zimbabwe governor Dr John Mangudya are expected to propel the manufacturing sector to greater heights in the medium to long-term.
“There is a lot of activity in spite of what the economy has been going through. There is a lot of people who have been starting new companies, people that have been expanding their product lines and so forth,” said Jabangwe.
“We believe that the stability brought on by the new Monetary (Policy) Statement might trigger what we call a dynamic manufacturing of goods because one of the things we have also seen is that some of the investors that you see coming into the country are actually those that are going to the extractive rather than manufacturing, which is good because it leaving the space for local manufacturers to actually fill the gap.
“But we are actually urging our members to really accelerate their activities in terms of retooling and expanding their operations.”
Dr Mangudya’s dynamic MPS introduced key measures that industry was clamouring for which include the abandonment of the 1:1 rate for the US dollar and bond notes.
The 1:1 rate was replaced with the interbank foreign currency market trade, whose rates are determined by market forces.
Dr Mangudya also announced a local currency, RTGS dollars, which industrialists expects to reduce the cost of local production.
Further, exporters have had retention thresholds reviewed for small and large-scale gold producers to 55 percent; manufacturing (80 percent); all other minerals (50 percent); tobacco and cotton merchants, for input schemes (80 percent); tobacco and cotton growers (30 percent later 50 percent for tobacco); horticulture (80 percent); transport (80 percent) and tourism (80 percent).
The move is expected to increase the appetite for companies to ramp up exports.
Govt efforts to promote industrialisation
Additional Government efforts to curb expenditure announced by Finance and Economic Development Minister Professor Mthuli Ncube in the 2019 Budget are also expected to boost industrialists’ appetite to grow operations.
Prof Ncube says there is need to manage current account deficit, while there was also need to deal with external arrears, in terms of debt restructuring.
Creditors who include the World Bank and the African Development Bank (AfDB) have since been engaged and are happy with the debt clearance strategy.
And as the country moves to re-industrialise, there have been calls for industry to consider investing in new manufacturing equipment as opposed to “resuscitating” old equipment, so as to increase production, riding on improved efficiencies.
New equipment would reduce utility costs and also result in massive production to meet local demand, before companies think of invading the international market.
A number of companies in the country are using manufacturing plants, some of which were commissioned just after the First World War and the Second World War (1981 to 1945).
Experts believe such equipment no longer required “resuscitation”, but replacing with new ones.