/ 4 October 2013

Companies buckle under power cuts

Companies Buckle Under Power Cuts

New data has shown that the country's economy is on a slippery slope, which poses a challenge for the newly elected government.

The Confederation of Zimbabwe Industries' (CZI's) Manufacturing Sector Survey, which was released this week, shows that capacity utilisation has taken yet another knock. Most of the companies surveyed are now operating at less than 40% of their capacity.

The survey revealed that capacity utilisation in industries had declined by 5.3 percentage points to 39.6% this year, compared with 44.2% in 2012, showing that, cumulatively, capacity utilisation had slowed by 17.4% since 2011, when it was estimated at 57%.

The CZI is the country's largest industry lobby group. Its members are mostly companies listed on the Zimbabwe Stock Exchange.

This survey was an indication that an increasing number of companies are struggling to operate and have a large amount of capacity lying idle.

The government had revised 2013 growth targets to about 3.6% after a previous forecast of 5% growth in its 2013 national budget.

Investment will solve the problem
Economist John Robertson said that investment in new machinery, technology and competitive ideas will help to arrest the problem.

"That investment has to come from outside because, at the moment, there is no money in the country. But for that to happen, we need to be investor-friendly and we are not going to succeed if we do not change our policies because they are doing a lot of damage," Robertson said.

He singled out the indigenisation and empowerment programme that stipulates that locals must have a 51% shareholding in foreign firms.

He also said the country needed to fix erratic power supply, as well as its transport system. He cited problems in the rail sector, where those with heavy goods may be told to wait for six months before their shipments can be moved.

President Robert Mugabe has said that his government would deliver on its electoral promises, and ministers are likely to sign performance contracts, but analysts say the prevailing circumstances offer them little room to manoeuvre.

Last week, Vice-President Joice Mujuru told a consultative workshop for Cabinet ministers, their deputies and permanent secretaries that they would be subject to performance contracts.

Taking the lead role
She added that the office of the president and the Cabinet would take a lead role in monitoring and evaluating policies and programmes.

"Introduction of performance contracts will ensure that senior government officers, as custodians of policy formulation and implementation, are accountable for their actions to the people they serve," Mujuru said.

According to the CZI survey, which is widely recognised as Zimbabwe's leading analysis of the factors affecting business operations and growth, Zimbabwe industry faces mounting challenges.

"The results of the 2013 CZI Manufacturing Sector Survey shows that, following the rebound in 2009 in the manufacturing sector, growth is now fading. The slowdown being experienced in the economy at large has not spared the manufacturing sector. In 2013, average capacity utilisation has continued to decline, shedding 5.3 percentage points to 39.6%," reads part of the survey.

It added that, from the analysis of the various factors affecting the performance of the sector, it is clear that a number of factors continue to impede meaningful growth in the sector, including working capital constraints such as power and water shortages, ageing equipment and low domestic demand.

Zambia was said to have remained Zimbabwe's top export destination for manufactured products with 31% of the manufacturing share of exports. South Africa's market share increased from 12% to 18% .

Economic growth rate slows down
"The rate of economic growth continues to slow down, with gross domestic product projected to grow by 3.4% in 2013, down from an estimated 4.4% in 2012. The slowdown in growth is largely because of a slowdown in the performance of the key sectors, particularly agriculture and mining," said the report.

Ricky Mukonza, a public management lecturer at South Africa's Tshwane University of Technology, said Mugabe's bid to offer ministers performance contracts is questionable because, unlike in the private sector, where failure or success can be measured in terms of profit or loss over a given period, government programmes are more complex.

"It will be difficult for the Zanu-PF government to enforce performance contracts with its ministers. In addition to ascribing failure or success to one's performance, you must ensure that they are well resourced. Given the lack of adequate resources that the government is facing, it will be interesting to see how they are going to ensure that all ministries are resourced," said Mukonza.