FOR many years, capacity utilisation has been treated as a convenient shorthand for industrial performance in Zimbabwe and across much of Africa. Government statements, central bank commentaries and private-sector surveys routinely cite utilisation rates as evidence of recovery or decline in manufacturing. Yet, from a business, economic and financial perspective, this metric is deeply flawed and increasingly misleading.
By Brighton Musonza
In an economy grappling with capital scarcity, ageing industrial infrastructure, currency instability and structural transformation, capacity utilisation is not only insufficient, it often obscures the true state of industrial output and investment.
Intensity without expansion
At a conceptual level, capacity utilisation measures intensity rather than expansion. It indicates how much of existing productive capacity is being used, not whether the economy is actually producing more goods in real terms. From a business standpoint, this distinction is crucial. Firms can raise output by expanding capacity through new machinery, plant extensions or technological upgrades, even if utilisation ratios remain flat or decline. In such cases, real industrial output and revenues may be rising, while the utilisation statistic suggests stagnation.
In Zimbabwe, high utilisation figures have frequently reflected firms stretching obsolete equipment due to limited access to capital, foreign currency and affordable credit. This may temporarily lift production volumes, but it often comes at the cost of higher maintenance expenses, lower product quality and rising operational risk. Financially, this is not growth; it is asset exhaustion. Treating such outcomes as industrial progress distorts both policy signals and investor perception.
The subjectivity of “capacity”
A further weakness lies in the inherently subjective nature of capacity measurement. What constitutes “full capacity” is rarely defined by engineering standards or audited benchmarks. Instead, it is typically based on managerial estimates captured through surveys. These estimates are shaped by expectations about demand, electricity supply, import availability, tax policy and access to working capital. In Zimbabwe’s volatile macroeconomic environment, such variables change rapidly, making reported capacity levels inconsistent and unreliable over time.
Government targets increased capacity utilisation for local industry to ease prices of goods, reduce dependency on imports and facilitate job creation under National Development Strategy Two. pic.twitter.com/4CusXD69zo
— ZBC News (@ZBCNewsonline) February 9, 2026
From a financial analysis perspective, this undermines comparability across firms and sectors. A manufacturer facing chronic power outages may redefine its normal operating capacity downward, inflating its utilisation ratio without any improvement in output or profitability. For banks, investors and policymakers, this introduces serious information risk, as decisions are made on data that lack objective grounding.
Blind to productivity and structural change
Capacity utilisation also fails to capture productivity-driven growth and structural change, which are increasingly central to modern industrial competitiveness. Globally, manufacturing growth is no longer primarily about running more shifts or installing more machines. It is about producing more value with fewer inputs through automation, digitisation, better logistics and smarter processes.
For Zimbabwe and other African economies seeking to leapfrog outdated industrial models, this is particularly important. A firm that invests in automation may significantly increase output, reduce unit costs and improve margins, while using fewer machines and less labour. Measured utilisation may fall, yet the firm’s financial performance, export competitiveness and long-term viability improve. Capacity utilisation, in this context, penalises efficiency and rewards inefficiency, an inversion that is economically irrational.
Cyclical and backwards-looking distortions
Capacity utilisation is also highly cyclical and backwards-looking, making it a poor guide for long-term industrial strategy. In Zimbabwe, utilisation rates often spike during brief periods of currency stability or demand surges, only to collapse when macroeconomic conditions deteriorate. These movements tend to reflect short-term demand conditions rather than durable improvements in industrial capacity, competitiveness or supply-chain resilience.
From a macroeconomic and fiscal standpoint, this creates misleading narratives. Temporary increases in utilisation can encourage complacency in policy, delaying reforms in energy supply, infrastructure financing and industrial credit. Conversely, sudden drops in utilisation may prompt contractionary responses, even when firms are investing in new capacity that will only yield output over the medium term.
A bias against investment-led growth
Perhaps most damaging is the way capacity utilisation penalises investment. When firms invest in new machinery, expand factory space or build new plants, total capacity rises immediately, while output increases gradually. In the short run, utilisation ratios fall. Under a capacity-utilisation framework, this appears as industrial weakness, even though it reflects confidence, capital formation and future growth potential.
For Zimbabwe, where reindustrialisation depends on attracting long-term domestic and foreign investment, this bias is particularly harmful. Financial markets, lenders and policymakers may misread falling utilisation as a sign of distress, discouraging precisely the type of capital inflows and credit expansion needed to modernise industry.
No insight into value creation or profitability
Most critically, capacity utilisation provides no insight into value added, profitability or financial sustainability. From a business and economic perspective, industrial growth is not about how hard machines are run, but about how much value is created per unit of input. A factory operating at high utilisation producing low-margin, import-dependent goods does little to strengthen the balance of payments or corporate balance sheets. By contrast, a lower-utilisation operation producing higher-value, export-oriented goods may contribute far more to GDP, foreign currency earnings and fiscal revenues.
For an economy like Zimbabwe’s, constrained by external imbalances and chronic foreign exchange shortages, this distinction is fundamental. Measuring success by utilisation rather than value added risks entrenching low-value industrial activity that offers limited developmental or financial returns.
What should replace it
If Zimbabwe is serious about rebuilding its industrial base, it must adopt a more comprehensive and financially grounded framework for measuring industrial performance. Real industrial production growth, adjusted for inflation and currency volatility, provides a clearer picture of output trends. Manufacturing value added offers insight into how much the industry actually contributes to national income. Productivity indicators, such as output per worker and capital efficiency, capture competitiveness and technological progress. Gross fixed capital formation in manufacturing reveals whether firms are reinvesting and expanding. Export composition and sophistication indicate whether the industry is moving up the value chain and earning sustainable foreign currency.
Taken together, these measures align better with the realities of Zimbabwe, Africa and other modern economies navigating global competition, capital constraints and structural transformation.
Conclusion
Capacity utilisation has limited usefulness as a supplementary, short-term indicator of demand pressure and bottlenecks. But as a headline measure of industrial growth, it is analytically weak and economically misleading. For Zimbabwe, continued reliance on it risks confusing asset depletion with progress, discouraging investment, and masking the deeper structural reforms required for genuine industrial revival. A modern economy must measure what matters: output, value creation, productivity, investment and financial sustainability—not simply how hard old machines are being pushed.
Brighton Musonza (MBA), Fellow Chartered Management Institute (FCMI), management practitioner, IIBA Certified Business Analyst (CCBA) and SAP S/4 HANA Technologies Consultant. He can be found at mmusonza@aol.com.
