Zimbabwe: Zim Needs Inclusive Dialogue for Economic Recovery - CZI

interview

The Confederation of Zimbabwe Industries (CZI) last week elected Henry Ruzvidzo (HR) as the body's new president, taking over from Sifelani Jabangwe. Ruzvidzo's appointment came at a time the country's fragile economy is being buffeted by severe headwinds. Zimbabwe Independent (ZI) reporters Cloudine Matola and Lisa Tazviinga (ZI) spoke to Ruzvidzo on how he intends to steer the body during his tenure. Below are the excerpts:

ZI: You were elected as the new CZI president at a time when industry is facing numerous challenges, how do you intend to tackle these challenges during your tenure?

HR: Industry is faced with challenges on many fronts -- the structural adjustments occasioned by the Transitional Stabilisation Programme (TSP) have added to the cocktail of problems, which include low levels of investment, competitiveness issues due to the high cost environment, foreign currency access problems and rapid sustained depreciation of the local currency, as well as erosion of purchasing power of the local market. I believe the problems are not insurmountable. What is required is a unified national resolve to deal with the issues.

Sustainable solutions for our problems are found on two levels, a strategic level and an operational level.

At the strategic level, the nation requires a clear roadmap towards a long-term vision, perhaps as long as 50 years, which aligns citizens. At the operational level, there are issues such as market lead versus centrally-planned economic development, corruption, how the vulnerable members of society are to be assisted, capital raising models, the industrialisation model, marketing arrangements, governance systems and national institutions capabilities which have an impact on how capable the economy can become. CZI will play its part as a participant in finding solutions, as well as lobbying for an environment where business can develop and be attractive to investment. Fact-based solutions will be proffered.

ZI: Government recently liberalised the exchange rate, do you think such a policy move will help resolve the on-going currency volatility crisis? And does the new exchange rate regime make it easier for industry to source for foreign currency?

HR: The liberalised foreign currency environment is the way to go. The implementation of the system could have been more clinical in considering scenarios and having tighter rules to guide the interbank system operations. The seed capital available and the marketing of the system could have been better. The introduction of bond notes, for instance, was done with more vigour than the current interbank system. The new open market trading system should make it easier for industry to source currency. the challenge at present would appear to be how to entice holders of currency to use the interbank and not alternative grey markets. The status of RTGS currency can be enhanced to incentivise its use; government may need to take the first step to exclusively use the RTGS.

ZI: Zimbabwe has been experiencing severe load-shedding, how has this impacted on the operations of industry, particularly in terms of production?

HR: Industry in the major centres has so far been spared from severe load-shedding. We understand the current state of affairs is not sustainable and we have been working with the power utility (Zimbabwe Electricity Supply Authority -- Zesa) to explore viable supply arrangements.

ZI: In 2018, CZI was lobbying for lower power tariffs, which were cited as one of the factors triggering the tide of price increases. Is it one of the issues you will be pushing for during your tenure?

HR: Energy is a major factor of production. For competitiveness, the cost has to stay in line with regional competition. CZI has had regular engagement with both the regulator (Zimbabwe Energy Regulatory Authority) and Zesa and will continue to have such engagement to achieve a win-win for both parties.

ZI: Over the past decade, industries have struggled to attract fresh investment capital for retooling, expanding operations and procuring raw materials, are there any signs that the situation will improve?

HR: Industry has been unable to attract investment capital from both local and external investors during the past decade, with the exception of, perhaps, the years 2016-2017, when we saw investment in a number of sectors for import-substitution, as local sourcing of products became more viable on the back of SI64. The situation is looking rather bleak at the moment due to the volatility of the local market for goods. The devaluation of the local currency, however, can lead to opening up of export markets, if stability in exchange rate is achieved and foreign currency access by manufacturers improves.

ZI: Finance minister Mthuli Ncube projects the economy to grow 3,1% this year, do you think this target is achievable?

HR: The demand for products for most companies has fallen sharply due to prices not matched to purchasing power. We are pushing for rapid stabilisation of the situation to avoid further contraction of the economy in real terms.

ZI: Over the last three years, government has embarked on an initiative to set up Special Export Zones (SEZ) and CZI submitted recommendations around that. How do you think the initiative should be implemented?

HR: Special Economic Zones have been used by other countries such as Ethiopia to attract investment, with obvious success. Good implementation is the key; our view is that the process is taking too long.

ZI: According to the CZI Manufacturing Survey for 2017, 15% of the workers in industry lost employment, while 34,3% of companies were on the brink of collapse and capacity utilisation shrunk to about 48,2% in 2018. Is the manufacturing sector in sound health?

HR: I am not sure I can confirm the employment figures and firms on the brink. It is true though that the manufacturing sector has serious challenges. The sector has the potential to be the major employer in the economy and to be a reliable source of reasonably priced goods. We need to change the narrative that local goods are expensive and of inferior quality. With the right support policies during the last five years, we saw local products beginning to compete effectively against imports. The current situation is transient and local manufacturing can recover to supply goods for both the local and export markets.

ZI: Let us look at job losses. CZI previously indicated that direct employment in the manufacturing industry is about 15%-20% across all sectors; do you still see this problem persisting in 2019?

HR: When capacity utilisation drops invariably, jobs are lost, unless there has been investment in additional capacity. 2019 is a difficult year, six months has gone by already with persistent foreign currency challenges. Further cuts in employment have already occurred and might continue into the second half if the market for foreign currency does not attract sellers in the near future.

ZI: Apart from foreign currency shortages, what other factors are pushing commodity price increases?

HR: Foreign currency availability and pricing is the main driver for prices. Industry desires a more stable situation, where demand for products ensures efficient manufacturing. Fuel cost, the drought which has affected supply of industrial inputs from agriculture and the new taxes, are other factors that have pushed up costs and the price of goods.

ZI: The country is facing an acute fuel shortage, how has this impacted on the operations of industry, and what solutions can CZI proffer to address the challenge?

HR: Fuel shortages have had a major impact on industry with respect to movement of goods, as well as increased cost of production. Company personnel spend productive time in fuel queues and continue to do so. Companies that use fuel in their production processes have also suffered. The procurement arrangements for fuel and ethanol can be improved to ensure sustainable uninterrupted supply.

ZI: President Emmerson Mnangagwa has expressed commitment to engage with leaders of various political parties. Do you think the National Dialogue initiative will help resolve Zimbabwe's economic crisis?

HR: The country risk factors that have been an impediment to investment and capital flow are largely political.

Dialogue, which leads to more harmony in the country's politics, will allow citizens to focus on development of the country's economy. The world has moved on and the nation has lost out on three decades of development. our hope is that everyone can change their focus to issues that move the country forward. We have a lot of catching up to do.

ZI: How much has industry been getting from RBZ in terms of foreign currency allocations? Can you specify the exact amounts that various sub-sectors have been getting?

HR: No currency is being availed to the manufacturing sector insofar as I am aware. Industry has been queuing for the little available forex on the interbank market.

ZI: How much does the manufacturing sector need for retooling in the short term?

HR: Specific data on sectors is perhaps available at sector level. CZI will in future manufacturing sector surveys collect data on re-tooling requirements.

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