Local companies are pinning hopes on a much stable and competitive Zimbabwe dollar (ZWL) to increase their share in both the local and regional markets, industry lobby group- Confederation of Zimbabwe Industry (CZI) has said.
The ZWL has been on free-fall since its reintroduction in February last year, and this has weakened local companies’ competitiveness to produce.
However, since the reintroduction of the foreign currency auction system earlier this year, the ZWL has somewhat stabilized since mid-year to trade at ZWL$ 83/ USD.
“Once Zimbabwe has achieved a stable and competitive local currency, the Confederation of Zimbabwe Industries (CZI) plans to contribute towards policies that will see local companies increase their share of both the domestic and regional markets,” said CZI.
The development comes at a time the African Continental Free Trade Agreement (AfCFTA) comes into effect beginning of 2021 that is set to expose local companies to the world’s largest free-trading area.
But according to the CZI’s 2019 CZI Manufacturing Sector Survey, industry’s capacity utilization fell by 11.8 percentage points to 36.4 percent in 2019 from 48.2 prior year.
Earlier this year, the industry body anticipated a 9 percent decrease in capacity utilization in 2020 to 27 percent due to local currency volatility and foreign currency shortages.
“The auction system which has so far helped stabilize the exchange rate and has seen businesses access foreign currency on the formal market is one of CZI’s many proposals to authorities. The next phase will be focused on domestic and regional market capture, export diversification, and integration in the regional and global value chain. This will be for the period 2019 to 2030,” said the industrial lobby group.
As a result of the recent stability in the currency, CZI now anticipates doubling the share of manufacturing value added in GDP to 20 percent by 2030 from the current 8.9 percent.
The first phase meant for the period between 2019 and 2020 was focused on establishing a stable and competitive local currency.
“Efforts will also be made towards increasing the share of medium-and-high-technology production in total manufacturing value-added from less than 15% to 35% by 2030 as well as increase share of industrial employment from 7% to 40% by 2030,” it said.
But market watchers are less amused by headway made so far on stabilizing the currency, saying more still needs to be done before local companies are ready to compete both locally and regionally which include ensuring cheaper and accessible credit, improved product quality and bridging the technological gap for efficiency.
