Manufacturing Sector’s Capacity Utilisation falls 12%

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  • 2019 capacity utilisation fell to 36.4 from 48% in 2018
  • According to the CZI report, on energy, companies indicated that they get 50% monthly power supply from the main grid
  • The projected 2020 capacity utilisation is 27%, which is 9.4% below the 2019 level
  • South Africa dominated as the source of raw materials, followed by China and India

Harare – It does not come as a surprise, macro-economic activity has remained largely subdued as the country crawl through a debatable transition from dollarisation, a nail biting process especially when implemented in the absence of macro-economic stability and other necessary conditions.

The capacity utilisation in the manufacturing sector as reported by the Confederation of Zimbabwe Industries (CZI) in the “2019 Manufacturing Sector Survey”, fell to 36.4% in 2019 from 48% in 2018, representing a percentage change of 11.8%.

The 2019 capacity utilisation projection was 34.3%.

Capacity utilisation is the extent to which an enterprise or a nation uses its installed productive capacity. It is the relationship between output that is produced with the installed equipment, and the potential output which could be produced with it, if capacity was fully used.

Driving the decline in the manufacturing sector’s capacity utilisation was a combination of low output due to energy challenges, inflation and foreign currency shortages. There is an interplay between these factors where forex shortages results in low energy imports, while there is also a direct relationship between the movement in exchange rates and inflation.

In 2019 we had inflation running above government’s target. Right now, inflation is nowhere to be found.

According to the CZI report, on energy, companies indicated that they get 50% monthly power supply from the main grid. This presents a huge risk as far as production output is concerned because over 80% of firms as reported by CZI rely on the main grid to power their operations.

As Zimbabwe’s economy keep getting worse, most of the companies are facing underutilisation of capacity because of working capital requirements. There is less demand because of low buying capacity of consumers, whilst companies operations are also blighted by antiquated machinery which constantly breaks down.

The outlook does not look good either. The projected 2020 capacity utilisation is 27%, which is 9.4% below the 2019 level. In addition, the industry is expecting the figure to reduce to 20% if there is no drastic changes in policy framework.

Meanwhile, according to the report, South Africa dominated as the source of raw materials, followed by China and India.

India, the United Kingdom, South Korea and Germany makes up the top six in that respective order.

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