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Capacity utilisation increases to 47.4% in 2016

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Capacity utilisation increases to 47.4% in 2016

Below we share the summarized results of the 2016 manufacturing sector survey, conducted by the Confederation of Zimbabwe Industries.

Capacity Utilisation

The country’s weighted capacity utilisation increased from 34,3 percent realised in 2015 to 47,4 percent this year. This is the first increase in capacity utilisation since 2011. The red line below shows the capacity utilisation targets of the Industrialisation Development Policy (2012-2016); while the blue line shows the actual capacity utilisation realised.

The increase in capacity has been driven by boosted response rate within the small to medium sized enterprise and an increase in production by companies whose products are under Statutory Instrument 64.Sectors that largely contributed to the increase are Foodstuffs; Drinks, Tobacco and Beverages; Wood and Furniture as well as Paper, Printing and Packaging.

Competition by Country

Pricing Mechanism

Sources of Raw Material


Factors Affecting Input Supply

Eighty three percent of the respondents indicated that they use their raw materials within a year after they have purchased them while 14% store raw materials for between 2 to 5 years. 2% of the respondents store their raw materials for more than 5 years.

Safety and Health at WorkSixty-five percent of the respondents have a safety and health plan while forty-five percent have a medical insurance plan. Nineteen percent of the respondents reported injuries in the previous year.

Safety and Health plan at work

Value Chain Development and Business SynergiesEighty three percent of the respondents indicated that they are interested in linkages.

Views on Synergies

Linkages with SMEsFifty three percent of the respondents indicated that they already have Small and Medium Enterprises in their supply chain. Of the 53%, 41% indicated that SMEs supply raw materials, 10% indicated distribution services, 2% indicated after sales support.

Strengthening Business Linkages

Subcontracting

The graph below depicts areas that respondents are interested in subcontracting.

Collaboration on Innovation and Knowledge Flow

The collaboration status of respondents with other companies on innovation and knowledge is presented in the graph below.


Collaboration with Tertiary Institutions

The level of cooperation with local universities is depicted below:

Strategies for Price Reduction Respondents were asked what can be done to reduce the price at which their products reach the consumer. The results are tabulated below:

Age of Equipment

Source of EquipmentThirty-seven percent of the respondents source their equipment from South Africa, while 22% source from China. Twenty-one percent of the respondents indicated they source their equipment locally. Thirty- six percent of the respondents indicated that they face duty when importing capital equipment.

The detailed results are depicted below.

Source of Equipment

Eighteen percent of the respondents carried out new investments in capital in 2015. Of the proportion that made capital investments, 83% invested in machinery and equipment with the main reason being expansion. Fifty percent of the respondents who invested indicated that they invested in order to expand their businesses. The use of internal resources and profit remain the largest source of investment with 54% pointing it out as the main source. Eighteen percent of capital investment was financed from loans and borrowings with another 18% coming from FDI.

Use of ICT in Business

Infrastructure – Contributing To Industry UncompetitivenessSixty-eight percent of the respondents indicated that the current state of infrastructure is unable to support future growth.

Problematic Infrastructure Factors

Alternative Power Sources

Back up energy contributes an average of 30% of the total energy cost for the manufacturing sector. Electricity contributes an average of 8% to the total costs of the manufacturing establishments.

Working HoursTwenty-six percent of the respondents indicated that they changed their working hours.

Reasons for changes in working hours are depicted below.

Change in Wage Bill

Fourteen percent of the respondents indicated that their wage bill had increased compared to 2015 while 45% reported a decline in the wage bill and 41% had no change in the wage bill.

Retrenchments

In terms of retrenchment, 24% retrenched permanent employees while 76% did not retrench. Of the companies who retrenched, 54% highlighted declining business, 31% indicated cost cutting, while 13% indicated restructuring.Direct labour costs constitute 24.5% of the total input costs in manufacturing, while total employee costs constitute 29.9%.

Productivity Related Remuneration

Twenty four percent of the respondents highlighted that their wages are not productivity related. Only 10% of the respondents have their salaries strongly related to productivity. The results are depicted below:

Employee Training and DevelopmentThe results show that only 9% of the respondents extensively invested in employee training and development in the past year. More than 40% of the respondents did not invest in training and development.

Tertiary Education

The graph below depicts the respondents’ views on the curriculum and quality of graduates.

Foreign Trade, Investment and Financial Environment

ExportsTwenty-one percent of the respondents indicated that they export their products.

Reasons for not Exporting

Problematic factors when exporting

Incentives Government has to offer to stimulate exports

In terms of importing, the five most problematic factors are depicted below:


Financial Environment

Respondents were asked whether the financial sector provides a wide variety of financial service. The results are as follows.


Cost of FinanceRespondents were asked the rate of interest they would expect if government is to revive financial facilities such as DIMAF and ZETREF. 66% indicated that the interest rate should be between 1-5%, 18% indicated 6-10% while 11% indicated these should be disbursed at no cost.

What RBZ should do to ensure money circulation

Doing Business in ZimbabweThe major factors impacting business are:

Corruption
Policy Instability
Access to Finance
Competition from imports and
Low demand for domestic products.

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