SINCE the promulgation of Statutory Instrument (SI) 64 of 2016, most companies have ramped up their production, attracted new investment, boosted capacity, created employment, increased market share as well as improved competitiveness.
Exactly a year ago, SI 64 of 2016 was promulgated as a measure to manage the volumes of imports into the country following the realisation that not only were imports creating unfair competition for local manufacturers owing to much lower prices, but were also eating up the scarce foreign currency in the country.
To achieve parity and level the playing field, Government promulgated SI 64 of 2016 to restrict the quantity of imports into the country, issuing licenses only to cover gaps where local production was not adequate to meet demand.
Buoyed by the import ban, Confederation of Zimbabwe Industries (CZI) says the manufacturing capacity utilisation is expected to surge to 65 percent this year.
This would be the highest level of industrial capacity utilisation since dollarisation in 2009, after a peak of 57,2 percent reported in 2011 by the CZI.
Last year, capacity utilisation, which is a measure of industry’s use of installed productive potential, rose to 47,4 percent, up from 34,3 percent in 2015.
A latest Treasury report indicates the manufacturing sector is poised for growth this year with more gains being supported by SI 64.
“The benefits from the implementation of Statutory Instrument 64 and value chain strategies are expected to support activity in the sector,” reads part of the report.
“Furthermore, some companies in several sub-sectors have embarked on retooling exercises in order to improve product quality and business viability.”
Figures from the Ministry of Industry and Commerce, which are included in the Treasury report, further buttress how the implementation of SI 64 and other SIs has witnessed improved manufacturing capacity utilisation.
As at March 2017, tinned foods and vegetable makers led the movers with 42 percent capacity increase to 80 percent from 38 percent before June 2016.
Fertiliser and plastic packaging manufacturers have also made inroads of 15 percent and 23 percent capacity increase to 40 percent and 60 percent respectively.
Personal care products are now operating at about 50 percent capacity from about 30 percent last year.
Among other notable highlights is the five percent increase in tyre manufacturing to 35 percent from 30 percent and 33 percent increase in synthetic hair production to 55 percent from 22 percent last year.
Following the good rains and the anticipated bumper harvest, hopes are high that agro-processing industries will also record more gains.
Already, cooking oil manufacturers, yeast, biscuits and detergents producers are among the pack of companies whose production has recorded significant growth riding on the benefits of SI 126 of 2014, which also controls importation of these products.
The cooking oil industry’s capacity utilisation is now at 90 percent on average while significant investment in the yeast industry has been made — an industry that had almost closed, but is now operating at 83 percent.
The furniture manufacturing sector has spiralled from 45 percent to 75 percent; biscuit manufacturing is up to some 75 percent from a low of 35 percent while the detergent sector also rose significantly from around 30 to 60 percent.
The knock-on effects have been felt in some downstream industries, notably labels (five to 15 percent), packaging supplies (37 to 60 percent) and raw materials (20 to 37 percent).
Industry and Commerce Minister Mike Bimha has been on record urging the manufacturing sector to take advantage of the window provided by SI 64, reminding stakeholders the measure is not a permanent fixture but only designed to give them breathing space to allow them to retool and increase their productive capacity.
Industry was quick to respond and some, taking advantage of the opportunity, have been busy upgrading their machines and equipment, while others have been investing in new technologies to improve their productive efficiencies and boost competitiveness of their products, both in terms of quality and price.
Some multi-national businesses, which had hitherto been bringing finished goods into the country for sale, but were affected by the import restrictions, responded positively by establishing manufacturing plants in Zimbabwe, rather than pull out.
Among these are the Willowton Group of Companies, which is about to commission a plant in Mutare to produce cooking oil and soap, an investment worth US$40 million.
Another regional player, Trade Kings Zimbabwe, put up a US$15 million state-of-the-art detergent plant in Harare.
Although the manufacturing sector capacity utilisation improved significantly since promulgation of SI 64, Treasury admits that progress continues to be constrained by foreign currency shortages that are negatively affecting the importation of critical raw material supplies and capital equipment.
Industry also suffers from utility and infrastructural gaps that have been blamed for increasing the cost of doing business, which makes local products uncompetitive.
Concerns have also been raised about porous border posts through which cheap imports still find their way into the economy and crowd demand for local products.
High costs of borrowing have also been cited with regards to accessing affordable finance for working capital and retooling.