Manufacturing sector in $843m trade deficit

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INDUSTRY minister Mangaliso Ndlovu says the local manufacturing sector incurred a trade deficit of $843 million in 2018.
This comes as Zimbabwe struggles with a persistent trade deficit, which has become one of the country’s major challenges in its quest for economic recovery, with official data showing that the cumulative trade shortfall since 2009 has breached $20 billion.
“In 2018, government provided foreign currency support to the manufacturing sector of more than $1,066 billion, an increase of two percent from the 2017 allocation. This accounted for 24 percent of the total allocations made by government during this period.
“Despite such support, export earnings from the sector for 2018 were only $222,6 million. This gives us a sector trade deficit of $843 million,” the minister said at the launch of the Confederation of Zimbabwe Industries’ (CZI) State of The Manufacturing Sector Survey for the period September 2017 to August 2018 in Harare last week.
The minister said the situation was unsustainable, adding that the sector could do better.
“Notwithstanding the effects of sanctions, which have limited access to foreign markets, we could still double our exports in less than two years,” Ndlovu said.
He said manufacturers should look ahead into 2019 with a focus on boosting exports and import substitution.
“Despite considerable support from government, the industry still experienced foreign currency shortages, resulting in lost days totalling to three months for some companies.
“If we do not emphasise the importance of exports, we may find ourselves discussing a declining trend,” the minister said.
Speaking at the same event, Tafadzwa Bandama, CZI’s chief economist, said reasons for the sector’s subdued exports during the year included “high costs of production”, the fact that “some products are tailor made for the local market” and that “local products cannot compete on the international market”.
Meanwhile, CZI says in 2018, Zambia had the lion’s share of imports for locally manufactured products, with 26 percent of the companies exporting to the southern African country.
“Zambia is an attractive export destination for local products because the goods are invoiced in United States dollars,” Bandama said.
She said Malawi was the second major export destination, with 19 percent of market share while South Africa came third as an export destination at 14 percent in 2018.
Ndlovu encouraged the sector to pursue the Zambian market, adding that industry should assist government with policy direction in order to open other markets.
The CZI survey found that overall output for the sector grew by 12,1 percent in 2018. Turnover increased by 20,49 percent after increasing 21,57 percent in 2017, while the sector’s exports increased 10,6 percent after increasing 3,51 percent in 2017.
The confederation says output increased in tandem with improvement in capacity utilisation, which recorded a 3,1 percent increase from 45,1 percent in 2017 to 48,2 percent in 2018. newsdesk@fingaz.co.zw