CZI projects flat capacity utilisation

LIVINGSTONE MARUFU

Industry capacity utilisation may remain flat this year or rise marginally due to severe headwinds the economy is experiencing, the Confederation of Zimbabwe Industries (CZI) has said.

Dimming the prospects are crippling power cuts, acute foreign currency shortages, high inflation, volatile exchange rate and limited lines of credit, among many other challenges.

Last year, the industry capacity utilisation stood at 56.25%.

And this year, CZI president Kurai Matsheza projects it to remain flat or improve on the back of a stable exchange rate.

“We achieved a capacity utilisation of 56.25% last year and this year we expect it to remain the same or improve a bit but more realistic projections are expected this coming week,” Matsheza told Business Times.

He said local industry has engaged the government over weakening consumer spending power amid indications that the wages are too low for customers to buy goods and services resulting in  reduced production.

Zimbabwe’s inflation hit 257% in July 2022 from 192% in June, resulting in consumers living on margins.

“We are not seeing as much traffic as we used to see in our shops and also the retailers themselves are not buying as much as they used to do hence the aggregate demand is very low,” he said.

Matsheza said a high inflation environment naturally increases the frequency at which such wage adjustments need to take place.

The situation is exacerbated by exchange rate instability and soaring inflation.

“While this is happening, wages will not keep pace with the increases, resulting in the purchasing power of workers being eroded, thus causing reduced demand for goods and services, poor living standards and low economic growth.

“In the long run, this will certainly cause a reduced capacity utilisation and closure of some operations,” Matsheza said.

CZI chief economist Cornelius Dube said the manufacturing sector would rebound if the authorities can address the issues at hand.

“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 a need to address the currency challenge and the associated inflationary pressure, which can derail the momentum into 2022.