- Crippling economic growth are shortages of key economic enablers such as power and fuel, foreign currency shortages as well as soaring inflation
- Amidst this terrain, there is a general sentiment that government has failed to inspire confidence which is critical to promote investment and business operations
- “Clarity of national plans is important to build confidence”.
- Industry capacity utilisation fell to 36.4 from 48% in 2018
Zimbabwe’s economy is in very bad shape, manufacturing output is dwindling and the Zim dollar is moving in one direction that is, deteriorating where as a currency should fluctuate. At the centre of it all, various line of arguments have been raised regarding what is the underlying factor that needs to be addressed; others says it is the politics.
Speaking at the Polad Economic summit held in the Capital on Thursday, Mr Henry Ruzvidzo, president of the country’s largest business member organisation, the Confederation of Zimbabwe Industries (CZI) said policy and structural shortcomings are driving the dearth in Zimbabwe’s industries.
Compounding Zimbabwe’s economic woes are a combination of acute shortages of key economic enablers such as power and fuel, foreign currency shortages as well as soaring inflation.
Amidst this terrain, there is a general sentiment that government has failed to inspire confidence which is critical to promote investment and business operations. In 2019, Government gazetted a number of statutory instruments, famous among those being SI 142 which banned the use of multi-currencies.
It was back in 2009 where the government was forced to abandon the local currency which had gone up in an inferno of hyperinflation and adopted the US dollar as the principal currency alongside the use of other currencies such as the Rand. As the years passed by, the market began to experience liquidity crunch with little circulation of cash.
In response, the government introduced bond notes in 2016 until the currency changes of 2019 which saw the untimely re-introduction of the Zim dollar.
The shortcoming has been the failure of the local currency to hold value, creating currency distortion where the market is rapidly de-dollarising against government’s stance that it is illegal.
As such, the local currency does not inspire to be a store of value, which is one of the key characteristics of money.
Meanwhile, government is exempting other sectors of the economy to charge in US dollars, thus creating further distortions. The transition to a mono currency has been very bumpy while there’s unrelenting pressure to re-dollarise.
“The currency distortions are not sustainable and the uncertainty around policies encourages investment,” Mr Ruzvidzo said.
“Clarity of national plans is important to build confidence”.
In 2019, industry capacity utilisation fell to 36.4 from 48% in 2018, presenting a percentage change of 11.8%. 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.
Structural shortcomings including the lingering forex, electricity and fuel shortages are threatening to see a further decline in industry’s capacity utilisation. 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.
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