Michael Tome Business Reporter
ZIMBABWE’s food manufacturing sector procures over 70 percent of its raw materials from outside the country, making it one of the heaviest consumers of scarce foreign currency in the country.
Confederation of Zimbabwe Industries (CZI) chief economist Cornelius Dube revealed this at the ongoing CZI 2021 congress, which is running under the theme, Upper Middle-Income Industry For an Upper Middle-Income Economy “a time for industrial transformation.”
According to Industry and Commerce Minister, Dr Sekai Nzenza, the manufacturing sector’s capacity utilisation increased to 47 percent in 2020 from 36,4 percent in 2019 and it is anticipated to grow to 61 percent by end of 2021, which has increased the demand for forex.
Indications are also that locally manufactured products now occupy 65 percent of the domestic retail supermarket shelf space.
Although this demonstrates growth trajectory in the local industry’s capacity utilisation, a worrying trend is emerging considering that much of the raw materials are being procured outside the country, hence no benefit accrues to the local downstream value chains.
The trend has undoubtedly put pressure on the country’s balance of trade, given the huge resultant import bill emanating from the importation of some finished goods and raw materials.
Notably though, in terms of volume of foreign inputs, the manufacturing sector comes second after the electronics and chemicals industry, where 90 percent of the raw materials are imported.
“There is a lot of dependency on foreign markets for manufacturing, which has led industry to continuously talk about foreign currency availability.
“While we say this economy is agro-based it is also surprising that the manufacturing of food in Zimbabwe would require almost 70 percent of raw materials that are coming from the foreign markets.
“Manufacturing industries of electric motors, transport equipment and chemicals use 90 percent of raw materials from foreign sources.
“So in other words our economy has actually lost its downstream value chain dependency as we are all looking at foreign markets now,” said Dube while addressing delegates at the ongoing CZI congress.
He indicated that the huge foreign currency requirement by the local industry did not translate to better exports receipts from the manufacturing industry considering that exports volumes were still low.
Demand for foreign currency by local industry has been growing for a while now stemming mainly from the need to acquire raw materials.
“Just because this sector is highly import dependent we see that the sector is consuming more foreign currency than what it is generating, if you look at since the start of the auction currency system in June 2020.
“The amount of foreign currency that is allocated at the auction to import raw materials, does not match the export receipts from that sector, ” said Dube.
Deliberations at the meeting have shown that the manufacturing sector remains a key contributor to the country’s GDP and central to the country’s dream of turning the country’s economic turnaround outside of agriculture and mining.