eBusiness Weekly
Martin Kadzere
Zimbabwe’s manufacturing output surged during the first half of the year, signalling a strong performance by one of the sectors the country is hoping will help support economic growth, according to the Confederation of Zimbabwe Industries (CZI).
The growth has been mainly driven by increased consumer demand and import restriction measures put in place by the Government to protect local companies, Kupakwashe Midzi, CZI acting chief economist told Business Weekly.
Last year, the sector grew by 1,2 percent and is projected to expand by 2,1 percent this year. Output, a key measure of performance of the industry, grew by 5,5 percent.
The Government had projected the economy would expand 4,5 percent this year, but Finance and Economic Planning Minister Patrick Chinamasa, is optimistic that growth could be as much as 6 percent, underpinned by manufacturing, mining, construction and agriculture.
“We expect that output for 2018 will go beyond last year’s 5,5 percent,” Midzi said. Capacity utilisation, he said, would also grow beyond 50 percent from 45 percent in 2017.
Sifelani Jabangwe, the CZI president said local manufacturers have registered solid performance during the first six months of the year, in term of exports, revenues and volumes.
“All round, we have seen very good performance from most of our members,” Jabangwe said.
The next drive should be on import substitution and enhancing export capacity by local firms.
“Focus on companies that have the capacity to substitute imports and those with potential to generate more foreign currency should be our priority,” Jabangwe said.
More pressure of forex demand
The improved performance is putting more pressure on foreign currency demand to import more raw materials, electricity and fuel. While the country recorded a 44 percent trade deficit during the first six months of the year, the makeup of the deficit show a significant shift from consumptive to productive imports.
Consumer goods imports declined 34 percent to $401 million between January and July 6, from $610 million as domestic consumption of locally produced goods surged.
“We have a trade deficit but the import basket is largely constituted with productive imports. All this confirm that there is an improvement in industry performance,” Jabangwe said.
Reserve Bank of Zimbabwe Dr John Mangudya, told Business Weekly that foreign currency requests from some companies have gone up by as much as 100 percent.
“We have companies that have grown their capacities by as much as 60 percent and what it means is that their foreign requirements have also increased,” said Dr Mangudya.
Double edged sword
Chinamasa recently argued some of the challenges the nation was facing was resulting “successes.”
“For instance, we have a challenge to do with foreign currency shortages. After we introduced Statutory Instrument 64 of 2016; what that SI deed was basically to trigger revival of our industry in the sense that we were able to operate within the protected market because of the restriction of goods which were now locally produced.
“What that has done most of the companies, which were dead revived their operations and those which were operating already were able to increase their capacity utilisation and the result of course is that they put more demand on foreign currency because these companies and I emphasise are into import substation.”
According to the central bank, companies that have registered significant improvement include producers of food products, beverages, packaging, medicines, leather and footwear.
These include Delta, National Foods, Lobels, Baker’s Inn, Tregers, Dairiboard, Dan Dairy, Nestle, Nampack, Mega Pack, Hunyani, Brown Engineering, Bata, Sable, Chemplex, ZFC, Windmill, FSG and cooking oil companies.
