Confederation of Zimbabwe Industries (CZI)
NEARLY half of Zimbabwe’s industrial capacity is lying idle, underscoring mounting pressure on firms as subdued production pushes many closer to distress, a Confederation of Zimbabwe Industries (CZI) consultant has revealed.
The deepening crisis in capacity utilisation reflects a broader structural strain on Zimbabwe’s economy, where a toxic mix of high operating costs, policy constraints and weakening demand is eroding industrial viability and accelerating company failures.
Over the past two years, companies have increasingly entered corporate rescue amid worsening macroeconomic challenges, including energy shortages, exchange rate volatility, shrinking liquidity, a 76,1% informal market, declining disposable incomes and weakening capital positions.
Last month, once-dominant retailer OK Zimbabwe entered corporate rescue despite lining up potential liquidity of about US$67,3 million, highlighting the severity of the operating environment.
Local firms such as Truworths Limited, Beta Holdings and Khayah Cement Limited have also entered corporate rescue, while others have exited the market altogether.
South African packaging giant Nampak Limited is seeking to sell its local unit, Nampak Zimbabwe Limited.
“Capacity utilisation currently is just above 50%. Which means a lot of capacity is lying idle. From most firms, more than 45% is capacity that is not being used,” CZI consultant Tichaona Zivengwa told NewsDay Business.
“These are firms that are almost in distress. If we add the issue of global risks, it’s going to be even worse.”
By “global risks,” Zivengwa was referring to the ongoing conflict involving the United States and Israel against Iran.
The conflict, which began on February 28, has triggered a stagflationary shock to the global economy, largely due to disruptions at the Strait of Hormuz — a key transit route for about 20% of the world’s oil and liquefied natural gas.
Brent crude prices have since surged past US$100 per barrel, driving up shipping costs and insurance premiums as trade reroutes around the Cape of Good Hope.
Locally, fuel prices rose sharply to US$1,77 and US$1,71 per litre of diesel and petrol, respectively, on March 4, from US$1,52 and US$1,56.
“Fuel is a major input in the production process,” Zivengwa said.
“The rise in fuel prices is also going to be translated into an increase in prices for a lot of products. We are likely to see inflation numbers going up.”
Beyond energy costs, the global disruption is also affecting fertiliser supply, threatening food security and complicating monetary policy as central banks confront renewed inflationary pressures.
“We’ve got firms that are into exports, which have access to markets outside. Those countries are part of global markets. So, it’s going to break that chain,” Zivengwa said.
“Also, supply chains of raw materials that are needed in the industry come through some of those countries. The manufacturing sector is going to suffer very much because of these risks.”
He added that exporters are already constrained by local policies, including foreign currency retention requirements imposed by the Reserve Bank of Zimbabwe, which limit access to earnings.
Under current rules, exporters must surrender 30% of their foreign currency earnings in exchange for ZiG.
“We depend heavily on agricultural inputs — about 60% of our inputs come from agriculture, especially for fast-moving consumer goods,” he said.
“This will affect both pricing and availability of inputs, worsening existing challenges.”
Zivengwa warned that Zimbabwe’s recent inflation stability could come under pressure from these external shocks.
“These risks are global, so we can’t tackle them as an individual sector. We need to tackle them at a national scale,” he said.
“At CZI, we continue to work with the government to move in a certain direction to circumvent some of these risks.”
The government has indicated it is taking steps to cushion the industry, including monitoring fuel prices to contain cost pressures.
