HARARE – Local industry players say the economy requires extensive capital inflows to underpin nationwide recapitalisation and position the economy on a sustainable recovery platform.
Zimbabwe’s manufacturing sector, which requires an estimated $2 billion to operate at full capacity, is being hampered by challenges including short-term financing systems, low product demand, machine breakdowns, high costs of imported raw materials, among other factors Davison Norupiri, Zimbabwe National Chamber of Commerce (ZNCC) vice president for Mashonaland region told stakeholders at a 2013 National Budget consultations meeting yesterday that the economy has reached a plateau as far as capacity utilisation.
“However, economy is stuck in an untenable low equilibrium, low capacity, low wage and low employment and this is not sustainable,” he said.
A close look at the recently revised growth targets by the ministry of Finance reflects that the industrial capacity utilisation has been stagnant.
Most companies have capacity utilisation hovering around 60 percent with poor performers, which constitute the bulk of the companies operating below 20 percent.
Norupiri said the Finance minister Tendai Biti must consider measures aimed at further deepening of the financial sector reforms will need to be pursued in order to build confidence and eliminate inherent vulnerabilities.
“We acknowledge your famous statement that, indeed the Treasury has limited fiscal space, however we need to emphasise that significant financial resources are required for infrastructure rehabilitation especially in energy which is a significant enabler in doing business,” he said.
David Govere, immediate past president of the Business Council of Zimbabwe concurred with the ZNCC boss and said government must restructure import duty and come up with ways to restore industry productivity.
“We need to rebuild the economy through the resuscitation of the local industry,” he said.
“By June this year we had over $3 billion in trade deficit and we can never be less than $5 billion deficit by year end.”
Govere said working markets should have at least 80 percent of its products on the shelves from the local producers and only 20 percent imported.
“Emphasis should be on value addition and local production to create jobs locally then rely on cheap imports thereby creating jobs for other markets.
“Actually more products should be included on the list to create more demand for local products, more employment and increase in capacity utilisation in industry,” he said.
Despite official data from the Confederation of Zimbabwe Industries showing that Zimbabwe’s industrial capacity has increased to 57,2 percent as of last year from 43,7 percent in 2010, industrialists have warned that the country should fire up its industry through preference and protection for those producing locally, employing more people and improving living standards.
Buy Zimbabwe chief executive Munyaradzi Hwengere also highlighted the need for government to come up with a mandatory local procurement provision.
Hwengere said local companies have the capacity to produce enough including for export.
Although captains of industry contend that to counter the effect of imports on local goods, there is need to revise duty on certain imports particularly basic commodities, others feel an outright duty increase across the board is not advisable.
However, an analysis of the current supply from local manufacturers is needed such that where local supply can reasonably meet local needs protection through tariffs and non-tariff measures may be implemented.
“When we impose duty there must be a mechanism to ensure that the duty measures are supported at the border, where there is a lot of smuggling taking place,” said Hwengere.
“There is need to incubate the local industry with proper control at the borders with the Standards Association of Zimbabwe taking a more active role in ensuring the quality of products coming into the country meet specific requirements including shipment inspection of such products before they are even shipped to Zimbabwe.”
In line with the desire to revamp the manufacturing sector, players in the industry expect the 2013 National Budget to address some, if not all, of the factors cited as inhibiting the smooth functioning of the sector.
Finance minister Tendai Biti is carrying out consultative meetings for the 2013 National Budget. – John Kachembere