Manufacturing sector on recovery path

By Stanley James and Owen Mandovha

The journey towards the recovery of the country’s manufacturing has been described by the United Nations Industrial Development Organisation (UNIDO) as positive, despite rising production costs, global shocks, climate change and socio-economic uncertainties.

A rise in manufacturing capacity utilisation, growth in exports, over 80 percent availability of local goods on retail outlets, massive recapitalisation, improved access to foreign currency from the central bank’s auction system are expected to lead to overall growth.

Despite challenges, the UN institution with a mandate for industrial growth has pledged commitment to work with Zimbabwe by formulating policies aimed at facilitating further recovery of manufacturing companies.

UNIDO country representative in Zimbabwe, Mr Tichaona Mushayandebvu, said, “The prospects for growth are there, judging by what is happening especially the sudden boom in overall capacity utilisation. What is needed is just to sustain the current measures in the long term through workable policies that address the needs of industry while focusing on further growth and viability.”

As Zimbabwe implements the National Development Strategy One and strives to achieve the aspirations of vision 2030, the United Nations body has also pledged to continue working with government.

“The reason why the institution is on collaboration with the Zimbabwean government is to find each other on modalities that can restore business confidence. It is our objective to ensure that the sustainability of the manufacturing industry is consolidated. No wonder why we are ready to further our cooperation with Zimbabwe.”

Zimbabwe’s manufacturing sector base has not been spared from the negative effects of depressed output in the past two decades.

However, since inception of the Second Republic, the manufacturing sector has been on the rebound after the rolling out of several policy interventions to rebuild firms.

Meanwhile, the recovery registered in the local cement production sector is yet another indication of increased activity in the manufacturing sector courtesy of reforms implemented by the Second Republic to turnaround the economy.

Industry capacity utilisation at one point nosedived to as low as 30 percent in the past owing to various economic constraints before the country started to witness a steady recovery, including the cement manufacturing sub-sector.

To meet increased demand emanating from the booming construction sector, cement giant Lafarge invested in a vertical mill plant which will increase capacity by over 50 percent to one million tonnes of cement annually.

This Monday, the Parliamentary Portfolio Committee on Industry and Commerce toured the Harare-based company’s plant to assess the firm’s operations and processes.

Lafarge Cement Head of Projects, Alex Mashangu said, “The plant will add new lines of products which were last produced some time ago. Before this investment capacity was at 450 000 tonnes annually and now it stands at one million tonnes.”

Chairperson of the Committee, Honourable Joshua Sacco noted that the investment by Lafarge is manifestation of the changing fortunes in the industrial sector where a number of benefits are already accruing to the economy.

“This company is an example of what is happening in the entire industry. The expansion of the plant resonates with the Second Republic’s quest to reduce dependence on imports. Also the construction work taking place in the economy will be well supported by local suppliers,” he said.

Lafarge Cement also opened a Dry Mix Mortar plant last year in response to the growing demand of other construction products alongside another hefty investment by its rival PPC which also invested in a new plant last year.

These investments are a tiny fraction of many examples of new industrial expansion projects which are taking place in the economy and as local fuel prices continue to drop in line with global trends, there is optimism the positive trajectory will consolidate the current stability gains in the manufacturing sector.

Costs, while being a key determinant of production at industrial level, pose a threat in terms of sustainable business growth.

However, a positive was registered as the cost of one litre of petrol in Zimbabwe dropped from US$1, 58 last week to US$1, 53 this week, with diesel now being sold at US$1.74.

While some companies matched the increase in fuel costs with price adjustments in the past few months, it is anticipated that the drop in the cost of the commodity will also translate to stability in prices for final products notwithstanding other variable costs.

“It is our hope that the trend will continue as it will also provide the basis for industry to recover while translating into affordable pricing models,” Dr Nyasha Kaseke, University of Zimbabwe Business School chairman said.

Economist Dr Zack Murerwa says it is also important for policy makers to monitor the current downward trend in the cost drivers, mainly fuel, to tighten any loopholes that might reverse the gains for the benefit of industry and commerce.

“Industry is grappling with high costs. Just imagine the 200 percent interest rate hike, how it is also affecting viability, but as for fuel, it just mainly means the trend needs to be sustained.”

Despite global fuel prices being subject to fluctuations based on several factors, for now the easing of the prices is restoring confidence in the production value chains.

As part of ensuring industrial growth, Government and the Reserve Bank of Zimbabwe have introduced fiscal and monetary policy measures to ease local currency depreciation and inflation.