Industrial capacity utilisation rises to 47pct, but firms not excited about protectionism

Industrial capacity utilisation rises to 47pct, but firms not excited about protectionism

HARARE, November 23 (The Source) – Zimbabwe’s industrial capacity utilisation rose to 47.4 percent in 2016, up from 34.3 percent last year, mainly driven by an import ban imposed by the government earlier in the year, a Confederation of Zimbabwe Industries (CZI) survey has found.

This would be the second highest level of industrial capacity utilisation – a measure of industry’s use of installed productive potential – since dollarisation in 2009, after the peak of 57.2 percent reported in 2011 by the CZI.

Zimbabwe’s manufacturing capacity utilization has been in decline since the turn of the century, mainly due to the collapse of agriculture, decaying infrastructure and lack of capital to replace ageing equipment.

While the CZI largely credits the import ban introduced in June for the improvement in capacity utilisation,it found that only 20.7 percent of surveyed firms viewed the government’s protectionist policy favourably.

“This seems to indicate that the overriding concern of industrialists is the uncertain macro-economic environment,” the CZI said about the survey’s findings announced in Harare on Wednesday morning.

“This conclusion is supported by the fact that 77.1 percent of respondents rated policy instability as negative  or very negative for the economy.”

Capacity utilisation in the post-dollarisation period peaked at 57.2 percent in 2011, before sliding to 44.2 percent in 2012, 39.6 percent in 2013 and 36.3 percent in 2014.

Zimbabwe’s manufacturing sector used to be the biggest contributor to GDP in the 1980s, accounting for 22 percent of the economy’s total output, before collapsing to about 7 percent in 2008. The sector’s contribution has marginally improved to an average 10 percent since then, according to official figures.

At its peak, the manufacturing sector used to contribute about 42 percent to export earnings, but this has declined to around 20 percent. Employment in the sector has also declined significantly, from 206,000 in 1991 to 127,300 in 2009.

About 60 percent of the respondents reported that there was no change in the viability of the operations from last year while 36 percent said business has been worse off compared to last year. Only four percent said business had improved.

A third of the business interviewed identified the country’s high cost of production as the main hindrance to exporting while 22 percent do not have the capacity to service the export market.

Shortage of electricity was the biggest infrastructure problem impacting business in the country, according to 23 percent of the firms.  

Low consumer demand, competition from imports and lack of liquidity were highlighted as the main constraints to the local manufacturing industry.