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The bulk of Zimbabwe’s manufacturing companies are not producing for export due to a host of domestic challenges that have eroded their competitiveness, analyst said Friday, citing results from a recent survey conducted by the government’s trade body ZimTrade.

Most companies, according to the survey, were battling to produce at 100 percent capacity and were therefore unable to cater for the export market while some found the exporting process cumbersome.

Other companies were being derailed by high production costs that ultimately eroded the competitiveness of their prices in the export market.

Announcing the results of the survey to gauge export levels in the manufacturing sector, Mike Nyamazana of Africa Corporate Aisors whose organization carried out the survey on behalf of ZimTrade said the few companies still exporting were doing so in small proportions as compared to the previous years.

“Of the companies surveyed, 40 percent are currently exporting while 60 percent of the surveyed firms are not exporting. Of those currently exporting, the results show that they are exporting a maximum of about 40 percent of total production,” he said.

Nyamazana said manufacturing companies cited cumbersome export procedures, low product quality, high production costs, loss of skilled manpower, depressed production levels and lack of export incentives as the major challenges affecting the capacity of companies to export.

Zimbabwe has consistently posted a deficit in its external current account since 2005 due to declining production levels and limited offshore lines of credit.

Production capacity in the manufacturing sector declined to 10 percent at the peak of Zimbabwe’s economic crisis in 2008 but gradually picked up to 60 percent in 2010 before it started declining again to 37 percent in 2013.

The country’s trade balance has also been worsening particularly after the country adopted multiple currencies in 2009 due to several restrictions affecting export competitiveness.

However, speaking at the meeting, director for trade in the Ministry of Industry and Commerce Abigail Mtetwa urged the companies not to be satisfied by supplying the local market where they are getting the foreign currency but to explore export markets to enhance earnings.

“Don’t live under the false pretense that the U.S. dollar will remain here forever. You need to strive to export and establish a continuous presence in the export markets,” she said.

As part of possible interventions to bring relief and improve fortunes in the manufacturing sector, Nyamazana proposed several measures, among them establishment of an export revolving fund, export incentives and hiking of tariffs on imported finished products that can be produced locally.

But European Union official Ane Pena differed on the use of tariffs to help the manufacturing sector improve its production and exports.

She said import duties on their own could not help improve productivity and export competitiveness of Zimbabwean companies, and urged for a solution that lowers production costs.

“Duties by themselves will not make your companies competitive. They will not help you to increase exports and they will only serve as a revenue measure for government and increase smuggling of goods into your country,” she said.

She warned that tariff measures were not sustainable and could backfire for the country as countries whose products would be banned in Zimbabwe could also reciprocate by banning Zimbabwean goods.

The Zimbabwean government in the 2014 national budget imposed several duty and tariff measures to protect the local industry but observers note that these measures need to have a limit to avoid unintended consequences.

South Africa remains Zimbabwe’s largest trading partner, followed by the EU and China.

Source : Forum on China-Africa Cooperation

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