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Gloomy outlook for Zim

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Industry has projected a gloomy economic outlook describing  the worsening operating environment  as VUCA, an acronym  that reflects volatility, uncertainty, complexity and ambiguity.

Exacerbating the situation is government policies   and regulations  which they say are unfriendly to business.

Apparently,  businesses are grappling  with high inflation, currency volatility and swelling forex  allotment backlog, among other  challenges.

Last week, President Emmerson Mnangagwa directed banks to stop lending as part of measures to  stabilize the economy.

But, captains of industry said the move would have far reaching consequences as it will  hinder industry growth prospects and  will also  dampen investor confidence.

The  Confederation of Zimbabwe Industry (CZI) chief economist, Cornelius Dube, told delegates at the  unveiling of the 2021 manufacturing sector survey report  in the capital yesterday that  policy shifts through statutory instruments was making the operating environment unpredictable thereby affecting manufacturing sector performance.

“In a survey done by CZI, 2022 economic outlook is expected to be worse than last year as 38% of the manufacturing industry is expecting it to be bleak with 28% expecting it to remain the same while 34% expect it to be better,” Dube said.

“But given that more members are expecting the economic outlook to be difficult, we are predicting a difficult 2022 for the business unless hurdles are addressed.”

He bemoaned operation and access hurdles at the foreign currency auction where it  is taking up to 50 days for the company to be settled after the bid had been accepted.

“Limited access to basic utilities renders manufacturing uncompetitive and the intermediated money transfer tax (IMTT)  is now a burden as it is not tax deductible like other transaction taxes. Rates by the city councils are also prohibitive for profitable production, services not decentralised to reduce compliance costs and time, the surrender requirements [both 20% and 40%] renders exporting unviable remain some of the impediments that are going to affect industry if not addressed,” Dube said.

The survey found out that 42.7% of the manufacturing sector is accessing forex from the auction system and companies are obtaining 39.5% from the auction with the majority of the companies getting their money from the US$ sales.

CZI president Kurai Matsheza  yesterday said the central bank  should correct the exchange rate pricing to stabilise the economy.

“The fundamental issue is exchange-rate management and we have been making this call for as long as we can remember. Correcting the exchange-rate pricing is what will stabilise the economy and provide some room to continue on a growth trajectory we were experiencing in 2021.”

“We have been consistently calling for policy measures to halt the emergence of a crisis that was somewhat predictable,” he said at the release of a report on the state of manufacturing.

 The 2021 manufacturing sector survey  revealed that overall capacity utilisation for industry was 56.25%, against a projection of 61%.

The CZI has changed how capacity utilisation is measured.Under the new definition it is the ratio of actual manufacturing output to potential full capacity output based on equipment supplier manuals, taking into account all idle plants that are not decommissioned.

The industry said it used to omit small players in the industry but this year they have included them.

Dube said if the authorities can address the issues at hand, the manufacturing sector is on the rebound.

“With no further shocks and disruptions, momentum to be carried over into 2022 and the government can help sustain this positive momentum by ensuring that the macroeconomic environment is conducive (inflation, exchange rate, enablers), addressing the ease of doing business, which remains an issue,” Dube said.

He said there  was need to address the currency challenge and the associated inflationary pressure can derail the momentum into 2022.

The survey also showed that the manufacturing sector realised a 5.5% increase in exports to US$404m in 2021 from US$383m in 2020.

The survey  also indicated that local products account for 75% of shelf space occupancy in the retail sector.

Industry and Commerce Minister, Sekai Nzenza said the industry withstood the test of several shocks including Covid-19. 

“I would also like to applaud CZI for endeavouring to consistently remind us of our successes and giving us a yardstick to measure and overcome our shortfalls in the manufacturing sector.

“Lastly, I would like to reassure you that my ministry remains open to industry as we pursue our mutual aspirations for a prosperous, profitable and resilient manufacturing sector.”

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