Industry faces gloomy 2015 – experts

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FOR the past year the local industry has continued to bleed with many struggling companies stampeding to the High Court in search of refuge from marauding creditors under the guise of judicial management but some may never make the journey back “alive.”
Official data show that over 4,600 companies closed shop between 2011 and October last year, with nearly 64,000 workers losing their jobs.
Chocked by a host of operational challenges, chiefly the absence of cheap working capital, antiquated equipment, high licence fees, utility bills, labour costs and stiff competition from imports, the revival of the local industry appears to be unreachable in the short-term.
Industrial capacity utilisation slowed, for a third straight year running, to 36.3 percent according to the industry body, the Confederation of Zimbabwe Industries.
Court-appointed administrators have found it difficult to revive many of the companies that have been placed under judicial management, with many creditors, particularly banks and employees walking away with nothing after liquidation.
“Of all the companies that I have managed since I started my career many years ago, only one has been turned around,” said one judicial manager who declined to be named for professional reasons.
Local firms have also suffered from lack of long-term financing to replace antiquated machinery, some of which was installed in the 1950s, a development seen as one of the chief reasons that has made the manufacturing sector uncompetitive.
Another judicial manager, Cecil Madondo of Tudor House Consultants painted a bleak picture for industry in the new year.
“It is my strong view that without adequate injection of capital and some amendments to the existing legal framework, the revival of the manufacturing sector will be limited and insignificant,” he told The Source.
The Zimbabwe National Chamber of Commerce (ZNCC) president Hlanganiso Matangaidze recently pleaded with government for measures to save industry saying: “We have really hit rock bottom.”
However, a labour and economic expert, Godfrey Kanyenze said any reforms that the government may implement would not result in immediate benefits in the new year.
“2015 is going to be a challenging year, just like 2014,” said Kanyenze who is also the director of the Labour and Economic Development Research Institute of Zimbabwe (LEDRIZ).Advertisement

He said the country would continue to experience a weakening of commodity prices, a decline in export earnings and sub-zero inflation while the liquidity crunch would worsen.
To compound matters, government has not put in place mechanisms to address the current constrains such as low demand for goods and services and access to cash at “reasonable” interest rates, he added.
“As long as all these and other factors to do with creating a conducive business environment and addressing the inhibitive costs of doing business, things are going to be challenging next year,” he said.
He called for social and political cohesion and an end to current political divisions within the ruling Zanu PF party and for politicians to focus on nation building to help revive the economy.
“Without unity between politicians, government, business and labour, we can’t do anything. This has far reaching consequences for the economy,” he said.
The Distressed and Marginalised Areas Fund (Dimaf), a $40 million joint facility between government and Old Mutual set up three years ago to bailout struggling companies, has not been effective in reviving ailing companies as some of them require millions of dollars to turn around.
On the other hand, the fund itself remains in limbo as most beneficiaries are failing to repay loans due to the long turnaround period required.
In a bid to revive the manufacturing sector, government has since introduced a raft of measures including lowering corporate tax on exporting companies to between 15 and 30 percent in the new year and banning imports of some locally manufactured goods, including bread and buns.
The European Union last October also lifted a 12-year suspension of direct financial aid to the government, imposed after allegations of rights abuses by President Robert Mugabe’s administration, and this is expected to help arrest the ‘alarming’ decline of the local industry.
“I expect things to get better (from next year) because of the change of position by European Union as far as sanctions are concerned. It would be easy for our companies to partner or do business with companies in Europe,” industry minister, Mike Bimha said recently.
The nation is now pinning its hopes on revival of companies such as Ziscosteel whose resuscitation still hangs in the balance, Merlin, Paramount, Blue Ribbon, Cairns, Olivine among others to bring relief to industry and workers some of whom have gone for years without pay.