industry.jpgPlayers in the manufacturing sector have expressed optimism about future growth prospects next year inspite of the a bit harsh operating conditions that are still affecting some key industries.

 

For an industry that has been focusing on recovery policies through mobilisation of fresh capital, the manufacturing sector is under spotlight on whether it can fully recover next year.

 

Although official data shows that productivity for the industry has been hovering below the projected annual capacity utilisation levels of at least 60%, players in the sector are confident of increased output.

 

While the financial sector has been called upon to assist with fresh funds, there is a strong belief that the provision of cheap loans will in the long run create favourable operating conditions.

 

A stakeholder in the manufacturing industry, Mr Enock Nyika believes that it is high time Government and the private sector come up with long lasting solutions to the production constraints that have affected the manufacturing industry.

 

“We are of the view that in the near future, the sector will immensely contribute to the development of the economy,” said Mr Nyika.

Concern is however being raised about the failure of local manufacturing firms in terms of sustaining the local markets as well as ensuring viability.

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However, with the prevailing weak domestic demand and old machinery that needs replacement, a manufacturer, Mr Masimba Rubatika says multilateral financial institutions should also assist government in providing adequate credit lines.

 

“We just hope the future will be bright as everyone gears towards the recovery of the economy,” Mr Rubatika said.

 

Given the extent to which the country continues to rely on export of primary goods, the Zimbabwe National Chamber of Commerce Vice Chairman, Mr Clever Madzara says value addition strategies should be put in place to boost productivity.

 

“Value addition is the way to go otherwise we are likely to experience some difficulties,” said Mr Madzara.

 

It remains to be seen whether the manufacturing sector will achieve the target of 70% capacity utilisation from current levels of 43% on the back of measures being implemented by the government to restore macro-economic confidence.

 

Meanwhile, economic analysts say liquidity constraints have been a major hindrance to economic growth this year as companies struggled to acquire financing required to increase productivity.

 

The liquidity constraints on the back of low and short term deposits in the financial sector which is struggling to regain customer confidence, curtailed the ability of the banks to give credit.

 

Furthermore, the Reserve Bank of Zimbabwe (RBZ), which is the lender of last resort was not in a position to provide capital to banks for the greater part of the year due underfunding by the Ministry of Finance in the prevailing multi-currency system.

 

Analysts say the impact of limited financial resources influenced slower capacity utilisation growth in 2010 compared to 2009.
 
Investment Consultant for Valuevest Consultants, Mr Herbert Mazonde said the majority of people are not under pressure to keep money in banks due to low interest rates leaving banks unable to offer loans.

 

“Liquidity constraints affected a lot of sectors including the stock market and manufacturing. Many would have wanted to borrow to expand operations but banks were unable to release funds. They had short term deposits and you can’t give long term loans when you are sitting on short term deposit,” said Mr Mazonde.

 

An economic analyst, Mr Innocent Makwiramiti said there is need for banks to introduce new interventions to instill confidence in the industry as well as tapping into informal sector for funds.

 

“What is needed is for financial services sector to develop financial discipline. Right now, most of the funds are in the informal sector so there is need to attract funds from the informal sector,” said Mr Makwiramiti.

 

Although bank deposits increased to US$2,3 billion by December this year from US$400 million in February last year, stakeholders are still concerned about the absence of an inter-banking system due to under-funding of the central bank, a that has also resulted in banks failing to borrow and lend funds.