ABOUT 14 percent of the country’s manufacturing companies were forced to retrench workers in 2020 due to the adverse effects of the novel Covid-19 pandemic, the Confederation of Zimbabwe Industries (CZI) has said.
Although the Covid-19 pandemic presents challenges to the operations of industry, capacity utilisation in the manufacturing sector rose 10,6 percent to 47 percent in 2020 from 36,4 percent in 2019.
In 2019, only seven percent of the companies in the manufacturing sector were reported to have retrenched their employees.
The country’s largest industry body revealed this in its 2020 manufacturing sector survey results that were released last Thursday.
It noted that the reasons for the retrenchment were largely to do with low capacity utilisation and low demand for products.
“On labour, 86 percent of the companies did not retrench their workers and coping mechanisms for companies that did not retrench include the deployment of shifts at the factories and salary reduction as well as adjusting other employment benefits to avoid retrenching workers. For the 14 percent that retrenched, their reasons for retrenching were low capacity utilisation, low demand for their products, and also as a mechanism to cope with Covid-19-induced challenges,” CZI’s chief economist, Mrs Tafadzwa Bandama, said.
This year CZI targets to increase capacity utilisation to 61 percent and to sustain the projection, the industrial body has noted the need for consistency in policy frameworks, currency and exchange rate stability, inflation reduction as well as export promotion.
The improvement in capacity utilisation during the period under review has been attributed to reliance on locally produced raw materials, as countries closed borders to curb the spread of the deadly viral disease.
In order to boost production and save jobs, the Employers Confederation of Zimbabwe (Emcoz) has appealed to the Government to inject a second stimulus package to cushion ailing firms.
The emoyers’ president, Dr Israel Murefu has stressed that reviving the economy requires stimulus support, similar to the ZWL$18 billion package that Treasury availed last year. Out of this, a total of ZWL$3,02 billion was allocated to the industrial sector in the form of guarantees.
“We think that a second stimulus package in the form of cash or a facility where companies borrow real cash and be able to improve their working capital requirements is needed if we are to give this economy some modicum of life and also if productivity and capacity utilisation is going to improve,” he said in a recent interview.
Mrs Bandama also said CZI has established that the bulk of Zimbabwe exports were destined for Zambia.
“And traditionally, this has been the finding that Zambia dominates as an export destination.
“On major exporters in the manufacturing sector, these include food stuffs by metal and metal products, drinks, tobacco, wood and furniture, clothing and footwear; these are the major exporting sub-sectors in 2020.”
In terms of value, processed foods recorded an 18 percent improvement in exports from US$98 million in 2019 to US$115 million last year.
“Top exports included sugar at US$76 million, fruit juices (US$5,6 million), pastry products (US$3,7 million) and tobacco (US$54 million),” said Mrs Bandama.
On macro-economic policy environment, CZI said the major development was the introduction of the weekly Forex Auction Trading System that brought some measure of stability in the exchange rate, which saw the taming of inflation in the economy.
“In addition to deceleration, the exchange rate became the major determinant in the pricing equation because companies were now accessing foreign currency on the auction so was closely linked to the official exchange rate,” said Mrs Bandama.
She said it was also encouraging to note that there was now a formal market for the foreign exchange access although it was still taking a little longer to access foreign currency at the market.
“However, besides the downside, certainty and predictability has improved in the economy and also fostering some measure of confidence and trust in policy making and implementation process,” she said.
Since the introduction of the weekly Foreign Currency Auction Trading System in June last year, official figures from the Reserve Bank of Zimbabwe indicate that US$795 million has been alloted to the productive sectors for the procurement of critical raw materials. – Chronicle