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Zim consumer goods imports plunge . . . Consumption of locally produced goods grows . . . Capacity utilisation increases to 60 percent

20 Jul, 2018 - 00:07 0 Views
Zim consumer goods imports plunge . . . Consumption of locally produced goods grows . . . Capacity utilisation increases to 60 percent

eBusiness Weekly

Martin Kadzere and Golden Sibanda
Zimbabwe’s consumer goods imports declined 34 percent during the period January to July 6 this year, as domestic consumption of locally produced goods surged, according to the latest statistics from the Reserve Bank of Zimbabwe (RBZ).

Consumer goods imports fell to $401 million from $610 million in same period last year, as the economy improved and shifted to relying more on commodities produced by local firms, as opposed to finished imports. The decline in consumer goods imports also reflect a significant shift from consumptive to productive imports.

RBZ governor John Mangudya told Business Weekly the economy was “on the rebound on account of strong consumer demand across all sectors of the economy.”

Mangudya said average capacity utilisation of manufacturing companies had increased to 60 percent during the first half of the year, from 45 percent, with manufacturers ramping up production. He said companies in the beverages and packaging sectors had expanded production and were now operating at full capacity.

“That growth was supported by the procurement of more imports to produce more goods and services for domestic consumption and exports,” he said.

President of the Confederation of Zimbabwe Industries Sifelani Jabangwe said 47 percent of their members invested in expansion since the beginning of the year.

Jabangwe said this was an indication that imports were shifting from being consumptive to productive.

Protective measures

Economist, Gift Mugano told Business Weekly that the introduction of the Statutory Instrument 64 of 2016 had resulted in companies protected by the legislation increasing capacity utilisation to as high as 80 percent while others were either operating at full capacity or had resumed exports while others undertook investments.

“SI 64 was introduced (in July 2016) because the economy was under siege (from cheap imports),” he said.

“This has substituted some of the imports, for instance Dairibord invested into Maheu, which they are longer importing,” Mugano said. “Nestle also made investments, which have helped substitute imports. There has also been increased importation of capital equipment in the areas protected by SI 64,” he added.

Forex shortage headache

While the economy is expanding, the development has created ‘positive headache’ for the monetary authorities due to increased demand of foreign currency to import critical imports such as raw materials and capital equipment for retooling.

The growth trajectory is putting pressure on foreign currency demand, but this might help local companies enhance competitiveness and gradually build up export capacity.

Exports on growth trajectory

“What is encouraging is the fact that exports are also increasing having grown 18 percent from $1,6 billion to $1,9 billion recorded in the first six months of this year,” Mangudya said.

The increase in exports, driven by mining has propelled growth in foreign receipts earnings.

Foreign receipts in the seven months to July this year took a positive upturn after rising 24 percent to $3,5 billion, driven by strong growth in export earnings, helping to improve by significant margin chronic deficit in the country’s nostro position.

The significant jump in the foreign receipts also shored up the country’s foreign net position by nearly $1 billion compared to $263 million during the same period last year.

“The current growth in exports during the first half of the year is sustainable as it comes after the 35 percent increase in exports last year. Thus with firm expanding their capacity utilisation, we expect exports to continue increasing as well.”

Mining earnings amounted to $1,6 billion, led by gold at $737 million. Tobacco raked in $218 million while manufacturing and agriculture realised $110 million $74 million, respectively. However, Zimbabwe continues struggling with foreign payments due to an upsurge in demand resulting from improved economic activity.

Economy on rebound

Mangudya said the economy was on a major rebound also drive by growing business confidence on the back of the new administration’s open for business narrative which is expected to sustain the current growth momentum going forward.

In its half year revenue performance, the Zimbabwe Revenue Authority said it was likely to surpass targets for this year due to anticipated increased economic activity.

“Revenue projections against anticipated increased business activity look positive,” said Zimra in a statement. “If this trend continues, the authority will exceed the 2018 target.”

Mugano said he shared the same sentiments as Mangudya, the there was an uptick in the economy, which was being spurred by growing aggregate demand.

“I share the same sentiments (that economy is growing). If you look at companies’ financial statements you see that sales have been growing, on average by as much as 20 percent, which confirms that there has been growth in aggregate demand. There has also been overall growth in national out, which has seen the Ministry of Finance revising its economic growth target for this year (from 4,5 percent) to 6 percent. In 2016, the economy grew by mere 0,6 percent, which coincided the same time when statutory instrument 64 was introduced,” Mugano said.

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