THE manufacturing and mining sectors exhibited resilience against challenges that characterised the economy in the third quarter of 2024, as measured by the Volume of Manufacturing Index (VMI).
According to the VMI report, prepared by the Zimbabwe National Statistics Agency (ZimStat), production indices rose in certain areas, capacity utilisation and confidence indices painted a less optimistic picture.
Capacity utilisation in the manufacturing sector fell to 47,1 percent in the third quarter of 2024 from 48,4 percent in the previous quarter, as the sector battled various challenges like power cuts and constrained access to funding.
Large manufacturing companies recorded a utilisation rate of 57,5 percent, down from 60,8 percent, while small and medium enterprises were at 45,4 percent.
The decline reflects challenges faced by companies in efforts to increase production, which included acute power shortage.
Mining sector capacity utilisation dropped to 52,7 percent from 57,5 percent. "Capacity utilisation is a critical measure of operational efficiency and indicates how much of a sector's production potential is being utilised."
ZimStat's Purchasing Managers' Index (PMI) for the manufacturing sector was recorded at 35, a slight decrease from 35,8 in the second quarter of 2024. The PMI, a key indicator of economic health in manufacturing, ranges from 0 to 100, with values below 50 indicating contraction.
The Manufacturing Confidence Index retreated from 3,1 in the second quarter of 2024 to 2,1 in the third quarter of 2024, reflecting diminishing optimism among manufacturers.
Similarly, the Mining Confidence Index fell from 12,9 to 7,3 over the same period.
These indices measure sentiment about economic conditions and business prospects.
"Confidence indices are vital as they provide insight into business leaders' expectations, which can influence investment and operational decisions," ZimStat explained.
The level of order books in the manufacturing sector was considered normal by 47 percent of respondents, while 70 percent of mining sector respondents echoed the same sentiment. However, only 6 percent of manufacturing respondents and 5 percent mining industry players deemed their stocks of finished goods above normal, reflecting restrained inventory buildup.
Stocks of raw materials also remained modest, with only 6 percent of manufacturing and 4,9 percent of mining respondents reporting above-normal levels. These figures suggest cautious production planning.
The report highlighted three significant challenges faced by both sectors namely electricity shortages, cash flow difficulties, and challenges in the outlook.
These constraints have hampered production and weighed on business confidence.
Despite these challenges, the VMI showed robust growth in some manufacturing sub-sectors. The overall index rose to 156,21, a 14,57 percent year-on-year increase from the same quarter in 2023.
Sub-sectors like clothing and footwear saw a remarkable 64,43 percent growth, while metals and metal products increased by 30,53 percent.
In contrast, textiles and ginning, as well as paper and printing, however, experienced sharp declines of 22,41 percent and 85,68 percent, respectively, highlighting the uneven recovery across industries.
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The mixed performance of the country's manufacturing and mining sectors in the quarter under review underscores the challenges encountered in navigating a difficult economic landscape during the quarter.
While some sub-sectors show promise, broader metrics like capacity utilization and confidence indices suggest cautious optimism is warranted.
ZimStat concluded, "The data reflects the resilience of certain industries but also highlights the pressing need to address systemic challenges to unlock the full potential of the manufacturing and mining sectors."
As stakeholders await the fourth quarter performance, addressing electricity shortages, improving cash flow, and fostering a stable economic environment remain critical to sustaining growth.
