3 January 2013

Zimbabwe: Bleak Future for Local Firms - CZI

THE Confederation of Zimbabwe Industries has warned that more companies are likely to collapse this year as the operating environment is expected to remain tough. Last year saw the number of companies going bust increasing, as industry continued to suffer from many ills.

These included high finance costs, regular machine breakdowns and the critical shortage of utilities such as electricity and water.

These factors add more challenge to the cost profile of locally manufactured goods, putting them at a disadvnatge against their imported counterparts.

"We are still in the shadows. It is going to continue this year and it is going to be a very difficult year," CZI president Mr Kumbirai Katsande said in an interview yesterday.

Capacity utilisation has dropped to an average 44 percent last year, compared with an average 60 percent in the previous year, CZI said in November last year.

Most of the industrial capacity is idle, making it more costly for companies to continue operating.

According to the CZI, some of the companies which closed down last year included Mutare Board & Paper Mills, Lion Matches, Hunyani Paper Mill in Norton, the Cairns Holdings canning factory in Mutare and its pasta factory in Bulawayo.

To address liquidity challenges facing the industry, Finance Minister Tendai Biti said the US$40 million Distressed Industries and Marginalised Areas Fund and the US$70 million Zimbabwe Economic and Trade Revival funds would be maintained.

But the sector needs at least US$2 billion to fully recapitalise, supported by a vibrant agricultural sector which provides about 60 percent of the raw materials.

Since 2009, overall investment in the manufacturing sector has remained low, with only about 17 percent of the companies managing to secure investments on new plant and machinery, leaving 83 percent with no major or new investments, save only for refurbishment and maintenance, Minister Biti said last year.

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