Industry buckles under pressure | Business Times

LIVINGSTONE MARUFU AND CLOUDINE MATOLA

Zimbabwe’s once-resilient manufacturing sector is teetering on the brink of collapse, battered by soaring production costs, outdated machinery, tight monetary policies and regulatory burdens that have stifled growth and rendered local goods uncompetitive.

As capacity utilisation falls for the second year running and exports stagnate at just 5%, concerns are mounting that Zimbabwe will become a dumping ground under the African Continental Free Trade Area (AfCFTA).

According to the Confederation of Zimbabwe Industries (CZI) Manufacturing Sector Survey, capacity utilisation fell to 52.3% in 2024 from 53.2% in 2023, highlighting deepening structural and policy-driven constraints.

“High cost of production is the major impediment to AfCFTA competitiveness,” CZI chief economist Dr Cornelius Dube told Business Times, a market leader in business, financial and economic reportage.

“We have excess capacity, but it’s idle because companies can’t produce at a viable cost. It’s killing any prospect of economic recovery.”

Dube noted a paradox. Local manufacturers have sufficient installed capacity, yet cannot exploit it because high costs make their products too expensive for both domestic and export markets.

 “Some cooking oil companies could meet total national demand on their own, but they’re only supplying a fraction of that because the economics don’t add up,” he said.

He warned that if 47.7% of plant capacity is idle, then existing investors aren’t seeing returns, raising red flags for new investors.

“The plants aren’t sweating,” he said. “They’re idle. That alone tells you all is not well.”

“Unlocking Capacity Is Urgent” — Kuvarika

CZI chief executive Sekai Kuvarika echoed Dube’s sentiments, calling for an aggressive national response to arrest the sector’s decline.

“We have excess capacity, yet we are only exporting 5% of manufacturing output,” Kuvarika told Business Times.

“What do we do to unlock that? We must regain market share locally and grow exports—but to do that, we need competitiveness.”

She added that cost containment, policy consistency, and investment in infrastructure are non-negotiable.

“Investors look at installed capacity versus actual utilisation. The current mismatch signals underperformance and missed opportunity,” Kuvarika said.

“We can’t afford to sit on this capacity any longer. It must be activated, or we risk industrial irrelevance in regional trade,” she added.

Economist Vince Musewe warned that Zimbabwe risks missing out on the AfCFTA opportunity due to lack of preparation and policy inertia.

“We’re not taking this seriously enough,” Musewe said.

“The local industry isn’t geared for major export growth. We need reform, cheap capital, and bold policy shifts. Otherwise, Zimbabwe becomes the supermarket of Africa.”

He said the economy is still too reliant on primary commodities, while industrial policy is outdated and unresponsive to regional competitive pressures.

Dr Moses Chundu, an economist at the University of Zimbabwe, said deep structural barriers continue to choke competitiveness. Chief among them, he said, is what he termed a “corruption premium”—hidden costs that drive up prices and distort competitiveness.

“These premiums raise the cost of doing business, while our competitors enjoy lower barriers. The result? Our goods are priced out of the market,” Chundu said.

He also pointed to unreliable and expensive utilities as a major barrier to industrial efficiency.

“Despite having plans for electricity generation, implementation has been poor. Power and water reliability remain fragile,” he said.

Chundu added that the country’s complex tax regime is another major driver of inefficiency: “There are far too many taxes, many of which overlap and burden producers. Rationalising this system is critical to restoring industrial health.”

Another economist Dr Prosper Chitambara said Zimbabwe’s industrial competitiveness is being suffocated by multiple factors, including over-taxation, weak infrastructure, and exchange rate instability.

“The more the taxes, the higher the cost of doing business,” Chitambara said.

“We need to simplify the tax regime and reduce the burden. At the same time, investment in transport, energy, and digital infrastructure is urgently needed.”

He stressed the need for a stable macroeconomic environment, saying that policy unpredictability and volatility have chased away capital and slowed investment in productivity-enhancing assets.

According to the CZI report, the average age of machinery in Zimbabwe’s factories is 17 years, with some plants running on equipment over 50 years old.

Yet another economist Malone Gwadu described the findings as “shocking,” calling for an urgent recapitalisation drive.

“We’re running 21st-century businesses on mid-20th-century machines,” Gwadu said.

“We need a cocktail of measures—targeted financial facilities, tax incentives for capital goods, and access to cheaper credit to recapitalise.”

He also called for the removal of unnecessary regulatory burdens and a reassessment of Zimbabwe’s cost structure, particularly in energy.

“Electricity tariffs are uncompetitive. We’re paying more than our regional peers, yet power remains unreliable,” Gwadu noted.

He further stressed the urgency of resolving the currency distortion: “We remain uncompetitive because we’re using a hard currency [USD] while others have flexible currencies. That makes our goods too expensive under AfCFTA.”

The 2025 outlook remains mixed. Many firms expect inflation, tight liquidity, and policy rigidity to persist.

FBC Holdings noted that tight monetary policy may lead to short-term challenges despite its stabilisation benefits.

“The macroeconomic environment is expected to remain unchanged due to the tight fiscal and monetary policy frameworks pursued by authorities. While this austerity stance may result in short-term economic challenges through tighter liquidity, achieving macroeconomic stability has broader implications, such as promoting certainty, encouraging investment and boosting productivity,” said FBC.

ZB Financial Holdings Limited (ZBHL) added that while improved rains may boost agriculture, a more balanced policy approach is needed.

“Looking ahead, the tight monetary policy is expected to remain in place to stabilise exchange rates and control inflation. On the back of an improved 2024/2025 rainy season, the economy is expected to benefit from a better agricultural performance buoyed by improved rainfall.
Notwithstanding, the efforts of authorities to maintain macroeconomic stability through prudent monetary policy, the Group respectfully suggest that a balanced approach be considered, one that harmonises stability with measures to stimulate economic growth.
The Group encourages policymakers to explore initiatives that foster a conducive business environment, promote investment and support the overall development of the economy,” ZBHL said.
Innscor Africa Limited expressed optimism that more predictable policies will emerge in 2025.

“Consistent economic policy will enable investment planning and unlock returns on the significant expansion projects already undertaken,” the group said.

Zimbabwe’s manufacturing sector is at a crossroads. Without urgent reforms to address cost pressures, modernise infrastructure, and stabilise the economic environment, the sector will continue to shrink—threatening jobs, growth, and the country’s standing in AfCFTA.

The call from industry is clear: unlock capacity, reduce costs, reform policies, and get Zimbabwe producing again—or face a future where the factory floor falls silent.

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