Printing Industry Faces Collapse

THE printing and packaging industry is tottering on the brink of collapse, triggered by an industrial crisis that has plunged output by 70 percent.

 

In a report prepared for government by the National Employment Council for the Printing, Packaging, and Newspaper Industry, sector players said many companies had shut down, and the few still operating were on the verge of going under. They said output in the sector had retreated to 4 100 tonnes last year, from 13 800 tonnes in 2011.

Raw material consumption by the industry retreated to about US$24 million last year, from about US$35 million in 2011, reflecting the extensive erosion of capacity among players, which triggered a 70 percent plunge in output during the period.
About 15 427 tonnes of raw materials were consumed in 2011, against 7 641 tonnes last year, with the effects of the closure of key paper mills being felt through the sliding volumes of input consumption.

In the report, which will be dispatched to government to guide policy formulation, the sector hit out at the Zimbabwe Revenue Authority (ZIMRA), the National Social Security Authority (NSSA) and the Zimbabwe Manpower Development Fund (ZIMDEF) for fuelling a dire crisis by garnishing accounts of failing firms and demanding “punitive penalties”.

The industry complained that ZIMRA used draconian tactics to compel defaulting firms to pay tax arrears, forcing many to close and opening the market to export. This, effectively, meant that the country was creating jobs in countries from which Zimbabwe was importing its products. These include textbook printing deals to Asian and South African companies.  They said the laxity in regulation of imported substitutes from China, India, South Africa and other countries had led to an upsurge of cheaper imports that have pushed the remaining players to the brink.

“Statutory bodies such as ZIMRA, NSSA and ZIMDEF (have) to be given directives to suspend the punitive, draconian legislation they (are) using to destroy companies,” the industry said.

“Punitive duties (have) to be charged on any importation of printed products. As companies are closing at an alarming rate… it was shocking to find that some statutory bodies had played a part. Evidently, as the economy shrinks and underperforms (ZIMRA, NSSA and ZIMDEF) have been insensitive to the practicality of the depressed economic situation,” the sector said in the report.

Revenues remitted to the fiscus have suffered a major knock owing to a worsening liquidity crisis which started three years after dollarisation in 2009. The Reserve Bank of Zimbabwe (RBZ) intervened to arrest the liquidity crisis with an injection of Rand coins and bond coins but emphasised the need for discipline if the turmoil was to be overcome. “This economy need discipline,” said RBZ governor, John Mangudya, pointing out that many countries had reviewed fuel prices down in the past week while they remained at the same level in Zimbabwe.

And across all sectors of the country’s tottering economy, the trading environment has deteriorated, with most companies struggling to stay afloat due to depressed demand and inability by cash-strapped customers to pay for goods and services on time. The result has been an unhealthy working capital situation that has seen most companies lagging behind with payments for their raw materials and other inputs. Regardless, ZIMRA has been demanding its dues, driving most companies to closure.

The Ministry of Finance says over 4 200 firms shut down between 2011 and 2013, forcing 55 000 workers out of their jobs.
ZIMRA has turned to desperate measures to collect every cent it can get to sustain government operations. But instead of trimming its bloated waistline to suit the tough economic conditions, government’s penchant for spending what it does not have continues unabated.  Its expenditure far exceeds what it is generating. Sustaining its appetite for cash is presenting serious headaches to ZIMRA.

The report exposed tremendous resentment against public policies such as awarding a lucrative printing contract to foreign firms about three years ago. “Donor funded projects such as the much heralded school textbook printing which was coordinated by UNICEF working with the Ministry of Education could have improved liquidity in the sector as well as the country in general since this was to be fresh money coming into the economy,” it said.

“However, the textbooks were for Zimbabwean children while the printing was contracted to foreign companies in South Africa and Asia. In the process, local companies that had capacity to print were ignored leading to employment creation happening outside our borders while local companies were left to collapse. This was a clear case of policy inconsistency,” said the report. – FinGaz

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