GOVERNMENT is targeting to increase manufacturing capacity utilisation from an average of 40 percent in 2019 to 75 percent by 2023, Finance and Economic Development Minister Professor Mthuli Ncube says, while US$2 billion will be required to retool industry.
In its 2019 Manufacturing Sector Survey Report, the Confederation of Zimbabwe Industries (CZI) found that capacity utilisation levels had fallen to 36,4 percent for 2019, which signifies an 11,8 percentage drop compared to the 2018 figure of 42,8 percent.
Giving an update of progress by the new dispensation in the implementation of the Transitional Stabilisation Programme (TSP) Minister Ncube said this week the first target was export led sector industrialisation, guided by the National Industrialisation Development Policy 2019-2023.
Further, he said the Government was focused on interventions for “attaining growth rate of at least 2 percent per annum and manufacturing value-added growth of 16 percent per year (and) Increasing merchandise export growth rate of 10 percent per year.”
Key pillars of the set targets entail development and strengthening of industrial value chains and Import Substitution, agro-based industrialisation, mineral beneficiation, export-led industrialisation and commercialising intellectual property.
Further, the strategy encapsulates heritage/natural advantage based industrialisation, ICT-led industrialisation, emerging industries and start-ups, backward linkages with SMES, anchor and cluster industries, industrial parks and innovation hubs and services-driven industrialisation.
Minister Ncube said the strategic thrust included review of labour market regulations, skills upgrading and productivity, driven under the Tripartite Negotiating Forum (TNF).
According to Confederation of Zimbabwe Industries (CZI) the contribution of the manufacturing sector to Gross Domestic Product had progressively declined to 12 percent from a peak of 25 percent.
“Industry has installed capacity that is underutilised for a number of reasons in the main policy related; recovery therefore can be rapid if the policy constraints are attended to.
“Some capacity has been lost altogether — investors, however, continue to show a lot interest in the country, with the work on the ease of doing business and serious attention to the main impediments for investment industry can quickly rebound,” said Mr Ruzvidzo.
He said a rebalancing of the economy to put manufacturing at the centre is called for.
Further, Mr Ruzvidzo said that policy support measures and removal of all impediments to stimulation of production in the economy is key and is very feasible.
CZI chief economist Tafadzwa Bandama, said the 2019 Manufacturing Sector Survey had shown that the manufacturing sector together with the general economy were in a trap, the “Low Growth Equilibrium Trap”.
This is because the economy was experiencing low output, savings, investments and high unemployment, shortages of foreign currency and an inefficient interbank market for foreign exchange, with later seemingly now under control since the auction system was introduced.
The identified impediments as the absence of key economic enablers inform of electricity and fuel and water, which has seen edible foods producers grappling with clean water supply.
Local authorities, she said, cannot import water treatment chemicals due to foreign currency shortages.
Other challenges included exchange rate volatility and inflation, which she said had precipitated drop in and low aggregate demand in the economy.
In addition, local firms are battling with the challenges of antiquated equipment whose breakdown was worsened by frequent power cuts and shortcomings from an unfriendly doing business environment.