ZIMBABWE’S manufacturing sector is poised for growth on the back of a firming South African Rand which is expected to subdue demand for imports despite driving year-on-year inflation, an independent research has shown.
A report compiled by Renaissance Capital projects prices for basic commodities predominantly imported from South Africa will rise this year. The investment firm expects the Rand to trade at ZAR7,00/US$1 from an average of ZAR7,30/US$1.
Zimbabwe’s imports from South Africa according to ZimTrade — the country’s trade development and promotion organisation — grew by 53% between 2005 and 2009 during a command-type economy which accelerated economic decline and company closures.
SA imports, official figures show, rose to US$2 billion in 2009, accounting for 60% of Zimbabwe’s imports.
The manufacturing sector, currently operating at an average of 45% capacity owing to limited capital inflows and high operating costs, last year grew by 2,7%, a distant third from agriculture and mining which averaged 30%.
Household consumption expenditure, according to the report, will soar driven by “a sizeable wage hike for civil servants”, an increase in foreign exchange remittances from Zimbabweans living abroad and a recovery in consumer finance.
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These developments, Renaissance Capital further said, would ease the liquidity problems facing the economy, which Finance minister Tendai Biti expects to grow by double digit figures by year end.
Treasury last year announced that the public sector, accounting for 250 000 of the country’s workforce, would this year have a 40% increase on its wage bill, a figure much lower than government workers expectations.
The downside of the firming Rand according to Renaissance Capital would inflate the cost of inputs and equipment.
“Although the agriculture sector has exhibited a strong recovery over the past couple of years, this has been off a very low base. This implies that the agriculture sector is not yet able to meet the manufacturing sector’s requirement for inputs, so manufacturers still rely on imports,” the report reads.
