Firms close for festive season

Published: 17 December 2018
INDUSTRIES in Bulawayo have started closing for the festive season, optimistic of resuming operations next year under an improved environment.

Confederation of Zimbabwe Industries (CZI) Matabeleland chapter president Mr Joseph Gunda said while a majority of their members were closing this week, some closed last week.

"Generally, a majority is closing this coming week (this week), a few have started closing but many will be shutting down on the 21st of December as they vary from operation to operation," he said in an interview.

"As we shut down, foreign currency remains the major challenge adversely affecting industry operations and we have not had the allocation of forex to our members for a while now."

In the past, firms have used the annual shut down period, which normally ends mid to end of January to service and repair their factories in preparation of resuming operation in the new year.

"But we hope as we begin the new year some of the challenges being experienced will be dealt with completely," said Mr Gunda.

Commenting on the operating environment during the course of the year, he said the first half of the year was quite promising with capacity utilisation in Bulawayo's manufacturing sector hovering above 60 percent on average. However, city firms began recording reduced output in the second half due to biting forex challenges.

"The forex challenges started biting and hitting hard on our members. Following the announcement of the Transitional Stabilisation Programme by the Minister of Finance and Economic Development (Professor Mthuli Ncube), we noticed that this then allowed industry in general to follow the speculative behaviour in the informal market.

"This was in the sense of uncertainty in the value of the bond note against the United States dollar," said Mr Gunda.

In 2016, the Reserve Bank of Zimbabwe (RBZ) introduced the bond note, a surrogate currency whose exchange rate was 1:1 against the United States dollar under a $200 million AfreximBank-backed facility to thwart then rampant cash hoarding and externalisation of foreign currency.

RBZ Governor, Dr John Mangudya, is on record saying the bond note was not the problem to financial market distortions and other challenges facing the economy at large.

The Central Bank boss has blamed financial and fiscal indiscipline in the economy as having plunged the country into the web of increasing money supply, spurred largely by issuance of Treasury Bills, which has provoked inflationary pressures.

Mr Gunda said market distortions triggered product shortages and price hikes as a result of speculative behaviour, uncertainty and instability.

"As the manufacturing sector, we could not manufacture to cover up that gap where a lot of our goods had been warehoused," he said, adding that the situation had also been exacerbated by forex constraints.

Despite the prevailing challenges, Mr Gunda said industry in Bulawayo remains optimistic that the prevailing situation changes, although the pace was being dictated by the market especially in terms of the value of the bond note against the United States dollar.

"It looks like when you go into the market, it's gradually self dollarising and we see it getting into the New Year," he said.

Prof Ncube is on record saying developments in the country's currency market were an indicator that the economy was "self dollarising" in response to prevailing market forces.
- chronicle
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