Zimbabwe’s industry requires about $200 million quarterly to import raw materials to operate optimally. The Confederation of Zimbabwe Industries, a lobby group representing local manufacturers, recently collated data on the foreign requirements from its members to determine their quarterly requirements to help the RBZ to budget for forex allocations.
“The companies — under the banner of CZI submitted — their total foreign currency requirements for three months and it came to about $200 million. The submissions have been made to the RBZ,” a source familiar with the developments told Business Weekly yesterday.
The manufacturing sector is projected to grow 0,3 percent in 2017 compared to 0,2 percent in 2016. Zimbabwe is facing acute foreign currency shortages largely resulting from low foreign currency inflows in an economy where the US dollar is the dominant currency.
Zimbabwe abandoned its domestic currency, which had been ravaged by hyperinflation that peaked at 231 percent at the last official count in June 2008, and switched to multi- currency system, which also includes the South African rand and Botswana pula.
Capacity utilisation of the manufacturing sector declined from 47,4 percent last year to 45,1 percent in 2017, according to a recent survey by the CZI, constrained by high production costs and shortages of foreign currency. The survey also showed 64 percent of raw materials are sourced locally, down from 84 percent in 2016, a situation central bank governor John Mangudya said was putting pressure on forex requirements.
South Africa remains the major source of raw materials, constituting 53 percent of the imports, the survey said. CZI president Sifelani Jabangwe could not be immediately reached for a comment.
Some industry players said the foreign currency situation was worsening with companies only getting an average of 50 percent of what they need. “Even those companies that produces basic commodities such as cooking oil have not been getting enough foreign currency and this has significantly affected production,” said an executive with a Harare-based company.
The worsening liquidity situation has negatively impacted importation of raw materials and capital equipment, thus reversing the gains of the Statutory Instrument 64 of 2016, which restricts importation of goods that local industry can manufacture.
In its 2017 first half budget performance and outlook report, the Parliamentary Budget Office said the Government should institute measures to improve overall capacity utilisation, as it had a bearing on the overall performance of the economy and the exports.
“There is need to deal with issues of corruption, policy inconsistency, lack of access to cheap finance, competition from imports and low demand for domestic products, which are impediments to the growth of the manufacturing sector,” it said.