Zimbabwe's manufacturing sector has not been spared the current liquidity challenged pervading the entire economy. The sector has failed to attract fresh capital and investments while capacity utilisation has remained depressed due to other challenges that include high cost of borrowings, high costs of utilities, severe power cuts, low priced imports and shortage of raw materials.

The week, Star FM (SFM) spoke to newly elected president of the Confederation Zimbabwe Industries Mr Charles Msipa (CM) for his insights into the state of the manufacturing sector and possible solutions.

Below are edited excerpts from the interview Star FM had with the manufacturing sector lobby group's president

SFM: Zimbabwe's manufacturing sector has been operating below par. What are the challenges facing the sector?

CM: I should probably begin by outlining that obviously there was a period between about 2000 and 2009 when our economy was ravished by hyperinflation and by devaluation. Many industries were unable to source imported raw materials. They were unable to replace machinery and infrastructure because there was no foreign exchange.

They had genuine viability constraints because of sub-economic pricing.

So you have a situation where by 2008 the lights were nearly out in the manufacturing sector. We introduced trading in multiple currencies beginning of 2009 and that ushered

in a period of macro-economic stability for the country.

But an immediate challenge that many businesses faced was that they were simply unable to access adequate and affordable capital either for working capital to restock on raw materials or medium term funding to upgrade their machinery or their equipment so that they could produce competitively.

Nevertheless you will note that there was appreciable increase in manufacturing capacity utilisation in 2009 compared to 2008 in most industrial sectors.

In 2009 and 2010 capacity utilisation was high and by 2011, it was as high 58 percent. In 2012 unfortunately we had a backward slide. The capacity utilisation in the annual manufacturing sector survey that we conduct had gone down to 44 percent.

We are currently conducting a survey to measure and assess capacity utilisation for 2013 and we think that it would have declined even further. The issues pertaining to this are to do with lack of access to capital, that has been one issue that has hobbled a lot of industries and I should stress that it is not a consistent picture throughout.

There are many industries that have suffered a very low capacity utilisation because they have not been able to access capital for their raw materials for one reason or the other but there some, particularly in food and beverages sector that have also been able to access capital and that have increased their capacity utilisation but broadly I would say that yes capital has been a major challenge for the past four years since the introduction of trading in multiple currencies.

SFM: You have just mentioned that accessing capital has been a major challenge for the industry. How much does the entire industry require to get back on its feet?

CM: I think it really depends on who is still on their feet. One of the things we will identify in the survey of capacity utilisation is to actually understand what the requirements are. I would say that the requirement is at least in the order of US$2 billion.

SFM: Can you break it down?

CM: The bulk of that would be really to upgrade equipment and machinery that would be probably 60 to 70 percent and the balance would be to be able to support and fund working capital requirements.

SFM: You had to lay off workers at a large scale. What percentage was laid off?

CM: Since I don't have the exact figures of the numbers of people who have been retrenched in the last four years I think there is a retrenchment board in the ministry of labour that may have more reliable statistics but I would say that . . . an estimated 30 percent have been retrenched in the past year.

SFM: What is your interaction with the ministry of industry and commerce? Have you articulated these issues to them and what action are they taking?

CM: As CZI, we have interacted extensively with policy makers, the ministry of industry and ministry of finance. We enjoy a fairly productive relationship and I think in response to some of the calls for affordable capital, there have been various schemes that have been established.

There was DIMAF for distressed industries, that certain companies have been able to access. But the truth of the matter is that the country has not been able to attract sufficient capital. We have had dialogues and there have been attempts by policy makers to establish funds for companies to access but these have been very limited. The funds available are a drop in the ocean compared to what the requirements by industry has been.

SFM: An election period always bring uncertainty in the economies and many countries, what is the position of the CZI on the elections planned for the July 31 considering the debate which went on about the country's readiness for elections?

CM: Yes there has been a lot of debate, a lot of different positions espoused about what is the ideal timetable.

What I am aware of is that the constitutional court ruled on two occasions that an election must take place on July 31 and that is what we must all respect and follow through. I think the most important thing about the election is that we must have a peaceful and credible election and I think the country can do it.

SFM: Does that have any bearing on the economy?

CM: Many businesses and potential investors take a wait and see attitude about the elections and they hold back on decisions on investments. That tends to slow down the economic activity. The key thing is that we need to move forward together as a nation and hold a peaceful and credible election that will clarify any uncertainties for these would be investors.

SFM: What would you say are the major priority areas in the country's industry this year. What impact would elections have on these priorities?

CM: The key priorities for the industrial sector given the declining capacity utilisation and competitiveness against foreign imported products are to restore the recovery that had commenced in 2009.

We need to restore productivity levels, capacity utilisation and our competitiveness as local industry against imported products in order to contribute to employment. Unemployment is very high so we want to make a fair contribution.

SFM: One controversial issue that seems to stand out especially during the elections period is the issue of economic sanctions that were imposed by some members of the western blocs on the country. What impact have these sanctions had on the local industry?

CM: There is an act that was passed by the US Government called the ZIDERA which imposed travel restrictions on certain individuals and our government.

But I think it went beyond certain individuals and identified certain enterprises in which the government has stake. It did have an impact in terms of slowing down financial transactions that needed to be vetted but more importantly there was a chilling effect to business.