Dumisani Nsingo Bulawayo Bureau
Zimbabwe could have lost up to $77 million through exporting raw hides in the third quarter of 2016 as the country lacks capacity to beneficiate the raw material, a survey has shown.
Leather Institute of Zimbabwe (LIZ) chairperson, Mr Cornelio Sunduza, said the Special Economic Zones (SEZs) model was expected to attract increased funding for the leather sector and enhance value addition and beneficiation in line with Zim-Asset.
He said the performance of the leather sector was presently at its lowest ebb due to a myriad of challenges facing the economy.
“At the present moment I can say we are operating at about 10 percent capacity utilisation of the total installed capacity in the country. So we are not doing very well, there is need to boost the capacity utilization and real engagement,” said Mr Sunduza.
“We are facing an economic downturn. We have a financial crisis, so, whether you have production running within the economy you still face challenges because the people who are supposed to pay for the product don’t have the cash.”
He said a survey conducted by LIZ has the country could have lost about $77 million in the third quarter of last year due to failure to fully utilise hides at its disposal.
“Our value chain analysis last year using the Livestock Production Department statistics, we slaughtered up 284 000 in the third quarter and that’s 284 000 hides into the market. The net value of those hides at raw state was about $6 million.
“If those hides were proceeded to wet blue or semi processed leather they would have generated about $14 million and if those hides were finished to making shoes we will have made about 2,3 million pairs and those pairs would have given us about $77 million so we have shipped our labour,” said Mr Sunduza.
He said the implementation of SEZs would facilitate creation of areas of specialisation across the leather sector culminating in the growth of the industry.
“SEZs from my own assessment mean a zone where people get involved in areas of specialty. So if we have to specialise in the value addition of a hide, it means those that clean the hide right up to the distribution of shoes. All those are jobs along the line that we can create if a decision is made to say we need to inject working capital at certain period and stop the exportation of hides,” said Mr Sunduza.
He said due to the liquidity crunch businesses were forced to resort to 30 to 90 days payment plans with their clients.
“The payment terms that consumers are demanding and the business environment that we are operating in don’t augur well. We are a cash economy, we buy all the import raw materials for cash yet the customers expect us to give them 30-60 days facilities.
“So it means you must have a lot of cash to inject into your production to be able to carry the 30 days that you are waiting for payment so the cycle of cash flow revolution is very unbalanced,” said Mr Sunduza.