THE government must formulate and implement policies that will sustain local business operations and restore confidence in the financial sector, industry lobbyists have said.
BY KUDZAI CHIMHANGWA
President Robert Mugabe last week swore in a new cabinet that is expected to drive the country in the next five years.
Zimbabwe National Chamber of Commerce (ZNCC) vice-president, Davison Norupiri said the body expected the new government to implement policies that would lead to the recovery of industries.
He said the liquidity crunch had badly affected operations of most firms, and some of them had to resort to innovation to stay afloat.
“As a chamber, we expect high performance levels from the government on key targets so that we can get the economy moving towards growth again,” he said. “We need to see policies that are good for local industry being implemented; at least there will be no policy inconsistency as we have a government coming from one party.”
The inception of multiple currencies in 2009 was meant among other objectives, to boost local businesses’ economies of scale, with the hope that this would also provide a climate of spending in the country.
A number of companies resorted to borrowing from offshore credit lines in order to break even and in some cases make profits. However, companies without regional and international ties continued to struggle on the back of expensive local funding and the absence of a vibrant domestic market.
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Confederation of Zimbabwe Industries (CZI) vice-president, Edison Padya said a lot of companies had lost their competitive edge, due to the influx of imports coming into the country.
Zimbabwe’s sugar industry for instance has continued to collapse through imported sugar from South Africa, Brazil and India. “There is need for restoration of confidence in the country’s financial sector; we need policies that can govern the banking sector, so that our operations become sustainable,” said Padya.
He said that a number of companies in the manufacturing sector were badly affected by the liquidity crisis this year. Some companies shut down operations, he added.
“We as the CZI want to promote local manufacturing, we need a liquid market. Borrowing is expensive, and with interest rates ranging around 20%, it is not sustainable,” he said.
From 32,2% in 2009, capacity utilisation went upwards to 57,2% in 2011 before sliding down to 44,2% in 2012.
Zimbabwe’s manufacturing sector has been affected by the continued use of antiquated equipment and lack for funds for recapitalisation which has increased the cost of production.
Working capital, vital to fund stock in trade and to fund operational, marketing, distribution, and administrative costs, has continued to be a major challenge.
According to the World Bank, Zimbabwe’s manufacturing sector growth is projected at 1,5%, stunted by low investment and declining competitiveness amidst tight credit conditions with the services sector to remain the biggest contributor to Gross Domestic Product, at 41%.
Economist Eric Bloch said it was too early to determine whether there would be any changes to government policy aimed at reviving industry. He said that in order for foreign direct investment inflows to increase, there would be need to change the subsisting indigenisation laws.
Foreign companies are required to cede at least 51% of their shareholding to locals under the indigenisation law.
Analysts say there is need to re-establish diversified and strong functional linkages between industry and agriculture, mining, construction and the services industry.
