The Confederation of Zimbabwe Industries (CZI) has released its annual Manufacturing Sector Survey, revealing a stagnation in the manufacturing sector’s performance and a declining contribution to the country’s GDP.
Despite increased investments by manufacturers, according to the NewZwire report, output has not seen a corresponding rise.
Key Takeaways from the Survey:
Capacity Utilisation Declines Capacity utilisation, a key productivity measure for factories, dropped to 53.2% in 2023 from 56.1% in 2022 and 56.3% in 2021. Beverage manufacturers, including companies like Delta and Varun, had the highest capacity use at 61%, while the paper sector had the lowest at just 36%. Additionally, job creation in the manufacturing sector decreased in 2023 compared to 2022.
Manufacturing’s GDP Contribution Falls The manufacturing sector’s contribution to GDP has fallen sharply from 14.8% in 2018 to just 9% in 2023. This is a significant decline from the 1980s and 1990s when manufacturing contributed an average of 23% to GDP. The current dominance of trading, from wholesalers to retailers, in the GDP underscores the challenges local manufacturers face from cheaper foreign products flooding informal markets.
Increased Investment Without Output Growth Manufacturers increased their investments in equipment in 2023, with total investment rising to US$128.7 million from US$101 million in 2022. Despite 46% of manufacturers investing in expansion—up from 40% in 2022—this did not lead to a significant increase in output, reflecting ongoing productivity issues.
Foreign Exchange Sources In 2023, 65% of manufacturers’ revenues were in USD. About 76% of the companies surveyed obtained their foreign exchange from their own sales, while only 12% sourced forex from the auction system, which has since been discontinued.
Economic Outlook and Trade Readiness When asked about their economic outlook for 2023-2024, 47% of manufacturers expressed optimism, while 30% expected economic conditions to worsen.
Furthermore, most manufacturers do not believe Zimbabwe is prepared for the African Continental Free Trade Area (AfCFTA), which aims to increase intra-African trade by reducing tariffs and increasing competition. Local industries, burdened by high production costs and a reliance on the US dollar, doubt their ability to compete effectively.
The CZI survey highlights significant challenges facing Zimbabwe’s manufacturing sector, despite increased investments. The sector’s declining contribution to GDP and issues with capacity utilisation and productivity indicate a need for strategic interventions to revitalise local manufacturing and enhance its competitiveness in the global market.
