PRODUCTION costs, especially electricity still remain high despite government interventions to support the manufacturing sector, making Zimbabwe uncompetitive compared to regional peers.
BY TATIRA ZWINOIRA
The Confederation of Zimbabwe Industries (CZI) says the cost of production is 45% to 55% higher across the manufacturing industry as compared to the Sadc region.
Labour, water, transport, antiquated machinery, interest rates, finance and taxes are also part of the production cost build-up faced by local producers.
CZI found these and others to be the main impediments to growth of the manufacturing sector.
“When you stack it all up, the charges in Zimbabwe are very high. It is everything that you find when you compare it with South Africa, Zambia and other countries. We need some sort of mechanism that addresses each of the cost drivers,” CZI president Moyo said.
He said despite the best efforts from government and the central bank, interest rates had remained high and at 18%, were is unfavourable for companies.
The costs have often been cited as key reasons why producers have passed on the costs to consumers.
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According to CZI’s Sector Survey of 2016, electricity and water alone were constraining capacity utilisation of the manufacturing sector by 3,21%.
Clothing retailer Truworths Zimbabwe and PPC Zimbabwe are some of the companies that have been affected by some of these cost drivers, mostly electricity.
Truworths Group of companies merchandise director Lawrence Mabhiza told Standardbusiness that in 2015, the cost of electricity was quite challenging.
“In 2016, it was a bit better but still remains a challenge for our production,” Mabhiza said.
In November 2016, PPC Zimbabwe managing director Kelibone Masiyane said the cost of electricity was “one of the major cost drivers” of the company, paying 15 cents per kilowatt hour.
