Industry gears for growth

AS the country welcomes a new year, industry and commerce have made a passionate appeal to Government to ensure policy consistency throughout 2017 if the gains recorded last year are to be buttressed and built upon for future growth.

Last year, the manufacturing sector capacity utilisation reversed a four-year decline to surge to 47,4 percent from 34,3 percent in 2015, largely buoyed by the positive impact of Statutory Instrument (SI) 64 of 2016.

Government introduced SI64 on July 1, 2016 in a bid to revive the local manufacturing sector, which was being suffocated by imports mainly from neighbouring countries.

Under SI64, Government restricted the importation of 43 products including building materials, wheelbarrows, ice cream, flavoured milk, cultured milk, yoghurts, cooking oil, peanut butter and body creams, among others.

Loathed by importers, to the extent of organising a demonstration at Beitbridge Border Post, SI64 has become the envy of industry after capacity utilisation rose from an average of 34 percent to 100 percent in some cases.

But despite a rise in the import bill – hitting US$5,35 billion from January to September 2016 – a number of sectors, mainly cooking oil, saw capacity utilisation shooting through the roof.

In 2015, the import bill was US$6,3 billion.

Riding on the benefits of SI64, industry’s biggest representative body, the Confederation of Zimbabwe Industries (CZI) projects that overall manufacturing sector capacity would rise further to 65 percent this year.

Capacity utilisation – which is a measure of industry’s use of its installed productive potential – peaked at 57,2 percent in 2011 before receding to 44,2 percent in 2012; 39,6 percent in 2013 and 36,3 percent in 2014.

CZI vice president Mr Sifelani Jabangwe told The Sunday Mail Business last week that getting into 2017, it is critical for Government to guarantee policy consistency, which has been lacking in the past, if industrial capacity was to continue growing.

“It is gratifying to note there was an increase in capacity utilisation this year, for the first time in last four years, mainly due to import substitution.

“The Government, through the 2017 National Budget, and other policy pronouncements, has said that import substitution is the way to go, and we believe that it would remain like that.

“We believe that consumption in this country is quite high and import substitution regulations would help local industry to grow,” said Mr Jabangwe.

Industry says SI64 had 43 products on the initial list against 10 000 products that are imported, hence the need to continue with the policy thrust of boosting local industry.

“It is now entirely on Government to continue with the policy pronouncements made this year and there would be improvements in the local manufacturing sector capacity.

“Improvements on the local market would mean there would be an improvement on the export front,” said Mr Jabangwe.

The country’s manufacturing sector has been showing positive signs of recovery since July last year when Government introduced SI64 of 2016
The country’s manufacturing sector has been showing positive signs of recovery since July last year when Government introduced SI64 of 2016

Due to high production costs in Zimbabwe, exports have been declining this year, plunging 6,9 percent to US$3,365 billion last year compared to US$3,614 billion in 2015.

Under the prevailing multi-currency arrangement, export receipts represent the economy’s anchor source of the economy and banking sector cash and liquidity.

However, efforts to improve the ease of doing business environment, being spearheaded by the Office of the President and Cabinet, are expected to see the country’s products competing well on the export market.

Zimbabwe National Chamber of Commerce (ZNCC) president Mr Davison Norupiri told The Sunday Mail Business last week that business has gotten into the New Year with optimism and hopes that Government sticks to implementing those regulations announced last year.

“As business we are geared for growth and quite a number of companies are looking forward to the New Year with a lot of hope. We strongly believe that we should be mapping the way forward, especially with the policies that Government came up with in 2016.

“We know very well that we have got the issue of SI64 which Government promulgated and we expect that to stimulate production and make sure that all the sectors covered become productive.

“We also expect the Government to be consistent in respect of the policies that it has come up with, not to just withdraw or change the policies willy-nilly, because companies plan for the future. So the issue of consistency remains paramount,” said Mr Norupiri.

Mr Norupiri said business was in support of several other Government policies such as command agriculture since they result in the country saving a lot of foreign currency, which in turn, would be used to import critical inputs that are not locally available such as fuel.

In February 2016, Government announced that the country needed to import about 700 000 tonnes of maize to plug a grain deficit after El Nino affected harvests.

The Reserve Bank of Zimbabwe arranged a US$200 million facility from Afreximbank for the importation of grain, a figure seen as huge considering the acute foreign currency shortages that are occasionally affecting fuel imports and telegraphic transfers (TTs) when industry is importing raw materials.

Said Mr Norupiri: “I think the command agriculture is something which we are going to support as well. It saves the country in terms of foreign currency in importing maize.

“So the Government has seen it worth to come up with such a policy to save foreign currency to import other essential raw materials which need to be imported. The moment command agriculture is supported, it means business is also going to benefit.”

The success of command agriculture usually translates to the success of industry too, given that about 60 percent of raw materials used in the manufacturing sector come from agriculture.

However, Mr Norupiri urged Government to devise measures that protect the abuse of command agriculture by beneficiaries through selling inputs and side-marketing of products.

There were reports recently that some beneficiaries were selling inputs received under the scheme.

Mr Norupiri also urged business not to buy the side-marketed inputs as that “doesn’t build our economy” but only increases the “levels of poverty in our economy”.

Business also hopes for a better 2017 on the back of the introduction of bond notes, as an export incentive.

The RBZ introduced bond notes on November 28 last year, to spur exports, and in turn generate more liquidity for the country. Small-scale exporters such as tobacco farmers and artisanal gold miners stand to get 5 percent for the total value of exports they make while large-scale exporters get 2 percent.

It is envisaged that the export inventive would discourage money laundering.

“The introduction of bond notes by Government would increase the level of appetite for exports. But we don’t want businesspeople to go out and abuse bond notes. We believe our businesspeople are not dealers but proper businesspeople who adhere to good corporate governance,” said Mr Norupiri.

Industry also hopes to perform well this year, driven by Special Economic Zones (SEZs), but only if the idea is not allowed to “die a natural death like the Export Processing Zones”.

Mr Norupiri urged Government to skew benefits from SEZs in favour of local investors too, not the current scenario where the initiative favours foreign investors, with a raft of tax exemptions.

Economist Mr Persistence Gwanyanya said the economy would recover at slow pace this year, supported by improved performance in the agriculture and mining sectors.

“However, the final economic outturn will largely depend on the soundness of policies and concerted, and effective implementation of the same.

“The growth in the agriculture sector would be driven by improved rains, but much will depend on the effects of La-Nina (while) effective implementation of the command agriculture scheme would transform the agriculture sector in Zimbabwe,” said Mr Gwanyanya.

He added that firming global commodity prices, on account of a recovering global economy, would spur mining sector growth.

In the 2017 National Budget, Finance Minister Patrick Chinamasa projected at a moderate 1,7 percent GDP growth this year, against the background of anticipated moderate improvements in international commodity prices, fruition of planned mining investments and benefits from the ease of doing business reforms. – Sunday Mail

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