CZI: Capacity utilisation rose in 2018, but expect a sharp drop in 2019

Capacity utilisation of Zimbabwe’s industries will fall to just 34.3% this year, reversing an improvement seen in 2018, according to a report just released by the Confederation of Zimbabwe Industries (CZI).

In its 2018 Manufacturing Report released Friday, CZI said capacity utilisation – a measure of how much of a factory is being put to use – improved in 2018, rising 3.1 percentage points to 48.2%.

This rise was one the fruits of a ban on some imports under Statutory Instrument 122, as well as policies to support exporters, the CZI said. But all this has been undone over the past six months, as foreign currency shortages worsened and the Government reacted to commodity shortages by lifting the ban on imports.

Between August and November, capacity utilisation fell by 6.2 percentage points to 42%. The CZI blames the suspension of SI122, forex shortages, and “waning confidence in the economy due to a lack of a clear policy direction on currency issues”.

The worst is yet to come, according to CZI, if there is no immediate change of policy.

“Projected capacity utilisation in 2019 is expected to decline to 34.3%, representing a 7.7 percentage point decline compared to November 2018,” CZI says. “At 34.3%, some companies would have closed with attendant effects of unemployment.”

While dollarisation in 2009 eased inflation, the CZI report shows the negative impact that move has made on industry. After dollarizing, Zimbabwe also opened up its borders to foreign goods. This filled up the country’s shelves, but hurt its industries. In 2012, capacity utilisation stood at 44%, but fell to 39% in 2013. The bleeding only stopped with the import ban, after which capacity utilisation rose to 47.4% in 2016.

The new CZI report shows that Zimbabwe was actually seeing some improvement in 2018, before the collapse towards the end of the year. Overall output grew by 12.1% in 2018, in line with the rise in capacity utilisation. The biggest jump in output was for non-metallic minerals, up 49.33% in 2018, from growth of 8.33% in 2017. Output from food manufacturers grew 14.5%, while chemicals rose by 10.5%.

The CZI report calls for the liberalisation of the forex market, more transparency in RBZ’s currency allocation system and a limit on the importation of goods.

Other highlights of the 2018 CZI manufacturing report:

  • In 2018, 52% of raw materials were produced locally, down from 64% in 2017 and 84% in 2016
  • In terms of raw materials, South African dominance weakened by 7 percentage points to 46%, while China increased its presence by 4.4 percentage points as companies looked more to importing goods from original source
  • Zambia had the biggest share of export market for Zimbabwean manufactured goods, with 26% of manufacturers exporting there. Zambia was followed by Malawi (19%) and South Africa (14%)
  • Reasons cited by companies for not exporting; local products are uncompetitive, high costs of production, and some products are tailor made only for the Zimbabwean market

LEAVE A REPLY

Please enter your comment!
Please enter your name here