Industry Anticipates Strong Recovery In 2021
The local manufacturing industry expects capacity utilization to significantly increase to 61 percent in 2021 from 47 percent recorded last year subject to sustainability of stable inflation and exchange rate as well as improved consumption of local products, the latest manufacturing sector report has revealed.
The survey, done by local industry body, Confederation of Zimbabwe Industries (CZI) showed that the reintroduction of foreign currency on the domestic market mid-last year has brought relief for local companies’ capacity to produce.
The economy contracted 4.4 percent in 2020 due to the COVID-19 pandemic and instability on the exchange rate but a rolling vaccination program and improved business sentiment could boost industry this year.
“When comparing capacity utilization in 2020 and that projected in 2021, there is actually light at the end of the tunnel because almost all subsectors in the manufacturing sector are projecting capacity utilization will increase in 2021,” CZI chief executive officer, Tafadzwa Bandama said at a virtual meeting.
Bandama said, the projected levels of capacity utilization will also rely on various other factors such as export promotion of local products to increase demand.
The survey noted that despite a significant number of local companies having exported last year, export volumes remained very low as most companies still narrow their scope on the domestic scene due to high cost of exporting and red tape.
“In 2020, 61 percent of surveyed companies exported their wares but however, proportion of turnover that was sold locally was quite high at 81 percent. It tells us that many companies exported their wares but volumes are still low which means there is still opportunity to increase export volumes. It also tells us that most products are sold on the domestic market because companies told us that it is cheaper to sell on domestic market because there are no export licenses on the domestic market,”
“Companies can sell on the domestic market in USD so if there are so many challenges that make them uncompetitive on the export market, it’s better to sell on the domestic market,” said Bandama.
Chief Executive Officer of United Refineries, Busisa Moyo accentuated the need to ease the export processes and make exporting more attractive.
“Permits are still a challenge and we need to reduce the redtape and brainstorm how we can make exporting easier,”
“For example when we export to Namibia, they issue us what they call Service Level Agreements which bounds us to deliver (exports) at a certain time and so much. If you don’t deliver on time you pay a heavy fine,” said Moyo.