Zimbabwe manufacturing sector faces challenges

Industry and Commerce Minister Nqobizitha Ndlovu has called for urgent action to address the challenges stifling the competitiveness of Zimbabwe's manufacturing sector, after new findings revealed that over half of the country's manufacturing firms are not optimistic about improving performance in the year ahead.

The Confederation of Zimbabwe Industries (CZI) 2024 Annual Manufacturing Sector Survey, launched on Monday, highlighted that while the manufacturing industry in Zimbabwe is vast, with an estimated 4,552 firms employing at least 10 people, the sector's performance has faced significant headwinds. According to the survey, manufacturing output decreased by 0.5% in 2024, while capacity utilisation fell by 0.9 percentage points to 52.3% compared to the previous year.

The report pointed to several key factors contributing to the decline, including high production costs, obsolete technology, insufficient funding and government support, high taxes, electricity supply issues, currency instability, challenges with export retention, and competition from the informal sector.

Minister Ndlovu expressed cautious optimism about the future, noting that 44% of manufacturers expect better performance in 2025. He singled out the pharmaceutical, beverages, and furniture sub-sectors, where more than half of the firms anticipate growth. However, he stressed that significant challenges remain in the sector that must be addressed to improve competitiveness.

"I am enthused by the fact that there is a sense of cautious optimism, with 44% of manufacturing firms expecting better performance in 2025," Ndlovu said at the survey's launch. "The pharmaceutical, beverages, and furniture sub-sectors show particular promise, with over 50% of firms in these areas anticipating growth."

Despite these optimistic forecasts, Ndlovu emphasized the need for comprehensive policy interventions to resolve the ongoing challenges. High production costs, currency issues, and outdated technology continue to act as major barriers. Notably, the survey found that only 29% of manufacturers felt prepared to compete in the African Continental Free Trade Area (AfCFTA), underscoring the need for strategic investments and government support.

Foreign currency earnings from the sector were also highlighted, with 83% of the foreign currency obtained by the manufacturing sector in 2024 coming from domestic sales. However, a meager 5% of output was directed towards exports, indicating the need for a stronger focus on international markets.

"In 2024, the foreign currency earned by the sector was largely from domestic sales, with only 5% directed toward exports," Ndlovu noted. "This underscores the need to encourage manufacturers to explore export markets, reducing dependence on local demand and better utilising their production capacity."

The government is addressing these challenges through the Zimbabwe Industrial Reconstruction and Growth Plan, launched in October 2024. This plan, set to run until December 2025, includes key interventions designed to revitalise manufacturing production capabilities, improve efficiency, and enhance capacity utilisation.

The government is also pushing for stronger export performance, as manufacturing exports have seen gradual growth over the past few years. Manufactured exports totalled US$324.8 million in 2021, increased to US$366.5 million in 2022, and reached US$448.7 million in 2023 before slightly declining to US$432 million in 2024.

"This trajectory underscores our resilience and adaptability in a dynamic global market," Ndlovu said, noting that recent entrants to the industry, particularly those operating for up to five years, saw a significant output increase of 14%, showing strong adaptability to current market conditions. However, older manufacturers, particularly those operating beyond five years, have not seen similar improvements.

Despite these challenges, large firms showed an 8% increase in output, demonstrating their ability to leverage scale and optimise production. However, overall, capacity utilisation across the sector averaged only 52.3%, a slight decrease from 53.2% in 2023, indicating significant idle capacity that many firms are struggling to utilise effectively.

Minister Ndlovu concluded by calling for continued efforts to address these structural challenges, stressing the importance of enhancing access to financing, updating technology, and improving macroeconomic stability to foster a more resilient manufacturing sector.

"To achieve the desired growth and enhance competitiveness, we must prioritise key policy interventions that tackle these challenges head-on," he said. "This includes improving access to financing for retooling, addressing high compliance costs, and stabilising the macroeconomic environment."