11 October 2018

Zimbabwe: Capacity Utilisation Increases

CAPACITY utilisation has increased significantly across all productive sectors, amid indications the manufacturing sector is operating at 20 percent above the same period last year.

The cooking oil sub-sector has also grown exponentially from three manufacturers in 2010 to seven producers this year, with employment rising from 700 to 2 000 over the same period. One cooking oil maker joined the lucrative sector this year.

Further, companies such as Turnall and Delta Corporation have ramped up production, while new firms such as Varun Beverages and the Willowton Group, have also entered the fray, resulting in a spike in demand for foreign currency.

Varun Beverages produces Pepsi, Mountain Dew and Mirinda soft drinks, while the Willowton Group's popular products on the local market are Sunfoil and D'lite cooking.

The upsurge in production has seen Government raising economic growth projections to 6,3 percent, up from the 2017 National Budget forecasts of between 4,5 percent and 4,8 percent.

Global lenders, the International Monetary Fund (IMF) and the World Bank (WB), have also upped their economic growth projections to 3,6 percent and 2,7 percent, respectively. In April, the IMF had forecast a 2,4 percent growth, while the World Bank had put it at 1,8 percent.

This is an indication that industry's wheels are moving, despite strong headwinds, resulting in a sharp increase in demand for foreign currency. Last year, capacity utilisation across many sectors averaged 45,1 percent.

Last week, Finance and Economic Development Minister Professor Mthuli Ncube declared that, "it cannot be business as usual", adding that "bold decisions need to be taken on the reforms front in order to stimulate growth."

Confederation of Zimbabwe Industries (CZI) president Mr Sifelani Jabangwe told The Herald last night that production in the manufacturing sector is 20 percent up compared to last year.

Beverages and cement makers, despite shortages occasioned by foreign currency shortages, are flying high with production levels of between 20 percent and 30 percent more than in 2017.

"On average, everyone is performing better than last year," said Mr Jabangwe. "Industry is about 20 percent above last year's performance and you might have seen that the IMF has revised our economic growth projections.

"Government has also revised the projections to 6,3 percent, which is the SADC target. Essentially, we are one of the high growth economies in real terms. Due to the good performance, we use about 20 percent to 30 percent more foreign currency than last year and the challenges (forex shortages), are a result of our successes."

Statistics from the Zimbabwe National Statistical Agency (ZimStats) show that between February and August this year, the country's exports rose 24 percent to hit $2,4 billion, compared to $1,9 billion in the same period last year.

Month-on-month exports increased by 32 percent from $340 million in July to $449 million in August, indicating high production levels.

In its trading update for the second quarter and half year ended September 30 released yesterday, Delta Corporation said lager beer volumes grew by 52 percent over prior year for the quarter and is up 54 percent for the six months.

Company secretary Mr Alex Makumure said the business has "responded well to the surge in demand, with volume outturn surpassing historical peaks".

In a statement accompanying Turnall Holdings Limited's results for the half ended June 2018, chairperson Mrs Rita Likukuma acknowledged the improvement in economy.

"The group's improved financial performance for the period was anchored on increased production and sales volumes," said Mrs Likukuma.

Oil Expressers Association of Zimbabwe chairman Mr Busisa Moyo told The Herald yesterday that the industry has been growing, registering four new big players between 2010 and this year.

"We had three players in 2010, but the number has risen to seven now, with the latest coming in this year," he said. "If you also look at employment, it has expanded from 700 to 2 000."

Oil expressers are getting $20 million per month from the Reserve Bank of Zimbabwe to import soya beans, while another $12 million goes to the importation of about 350MW of electricity to power the growing manufacturing sector.

Statistics from the Zimbabwe Energy Regulatory Authority show that Zimbabwe gobbled 752 million litres of fuel in the first half of the year, representing a 24 percent rise from the same period last year.

About 60 percent of Zimbabwe's fuel is consumed by manufacturers. As production generally rises, the tobacco sector achieved 250 million kgs this year, shredding the 1999 record of 236 million kgs. Tobacco earned the country $730 million this year.

There was also significant expansion in gold, which has so far hit 28 tonnes, which is 2 tonnes shy of the annual target of 30 tonnes.

Standard Chartered Bank Zimbabwe board chairman Mr Lovemore Manatsa, believes the economy will continue to grow driven by high gold, diamonds and tobacco output, despite foreign currency challenges.

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