Manufacturing capacity to reach 51 percent

RESERVE Bank of Zimbabwe governor John Mangudya said the country’s manufacturing capacity utilisation is expected to surge to above 50 percent this year due to an import ban put in place by the government last year to protect local industries.

Mangudya, who was addressing a Confederation of Zimbabwe Industries meeting in Harare last week, said the country had experienced a net increase in employment in the last few months on account of positive growth in various sectors of the economy.

“If you look at the manufacturing sector, a number of companies in food processing have seen the capacity going up. The textile industry used to employ approximately 5 000 people but now employs about 6 000,” he said.
“The packaging industry capacity is now up at 70 percent and I would be surprised if the average manufacturing capacity is not above 51 percent,” he added.

Zimbabwe’s manufacturing capacity utilisation, which rose to 47,4 percent in 2016, up from 34,3 percent in 2015, has been in decline since the turn of the century, mainly due to the collapse of agriculture, crumbling infrastructure and lack of capital to replace ageing equipment.

Capacity utilisation in the post-dollarisation period peaked at 57,2 percent in 2011, before sliding to 44,2 percent in 2012, 39,6 percent in 2013 and 36,3 percent in 2014.

Zimbabwe’s manufacturing sector used to be the biggest contributor to gross domestic product in the 1980s, accounting for 22 percent of the economy’s total output, before collapsing to about seven percent in 2008.

The sector’s contribution has marginally improved to an average 10 percent since then, according to official figures.
At its peak, the manufacturing sector used to contribute about 42 percent to export earnings, but this has declined to around 20 percent. Employment in the sector has also declined significantly, from 206 000 in 1991 to 127 300 in 2009.

In an effort to protect the local industry, government last year promulgated Statutory Instrument 64 (SI64) to limit the importation of certain commodities, which local companies were producing.

The instrument saw at least 100 products being removed from the open general import licence. This resulted in improved capacity utilisation of local industries.

Mangudya’s pronouncement comes after a Ministry of Industry and Commerce document presented to the National Assembly in July indicated that the controversial import ban, which resulted in a diplomatic tiff between Zimbabwe and its regional peers, was bearing fruit.

“The agro-processing sector has generally performed above expectation and $154 million has so far been invested within that sector and edible oil sub-sector has increased capacity utilisation from about 10 percent to an average of 90 percent. This industry has also attracted $60 million in investment,” said the document.

In addition, the yeast industry that almost closed managed to attract new investment and is now operating at 90 percent capacity utilisation.

“The biscuit manufacturing sector has gone up from 35 percent to 75 percent. The detergent industry has increased capacity utilisation from 30 percent to 60 percent, largely as a result of increased investment especially in new technology,” the document added.

It also noted that the personal care products sector had witnessed an improvement in capacity utilisation from around 30 percent to an average of 50 percent, with local personal care manufacturer, Medichem, experiencing an increase in demand of over 300 percent.

The pharmaceutical sector — with the exception of Caps Holdings — is believed to have grown from around 30 percent last year to 65 percent, resulting in a variety of drugs being produced locally.

“The furniture sector has also witnessed increases in the production of bedding and related goods, with capacity utilisation improving from 45 percent to the current 70 percent,” the ministry said, further indicating that the local furniture making companies had commenced exports of bedding within the region and increased working hours in order to meet demand. – Fingaz