Zim manufacturing sector crisis escalates; govt issues ultimatum
Reports from industry players indicated that major manufacturing companies had significantly scaled down operations, a move that is understood to have courted the ire of President Robert Mugabe's regime currently battling for legitimacy after the Zimbabwe Electoral Commission (ZEC) withheld results from the March 29 presidential race.
An industry captain said manufacturing sector players, particularly those producing 16 monitored products and three controlled products under a draconian price control regime, were summoned by the Secretary to the President and Cabinet, Dr. Micheck Sibanda, for a meeting meant to discuss commodity shortages in the country.
However, Sibanda, who appeared before the industrialists flanked by the Commissioner General Augustine Chihuri, commander of the Zimbabwe Defence Forces General Constantine Chiwenga, commander of the Air Force of Zimbabwe Air Marshall Perence Shiri and Central Intelligence Organisation director-general Happison Bonyongwe, simply read a statement and left.
The meeting, confirmed by various industry sources mainly aligned to the Confederation of Zimbabwe Industries (CZI), took place at 1600 hours on Tuesday, April 8, 2008.
Ultimatum to produce
“Sibanda simply told us to start producing and said we should not use the supply of products to influence politics,” an industrialist who attended the meeting said. Another one added, “It was an ultimatum.”
Mugabe has previously accused industrialists of working with alleged imperialist forces to stoke social upheaval by creating shortages in order to make his government unpopular with the masses.
The industrialists had earlier held a meeting with Reserve Bank of Zimbabwe (RBZ) governor Gono just before the March 29 harmonised elections at which they were asked to adequately supply the retail sector or risk punitive interest charges of 2000% on cheap funding unveiled to manufacturers under the basic Commodities Supply-Side Intervention Facility (BACOSSI) to boost production. BACOSSI funds had an interest of 25% and were meant to boost production after market-wide shortages that resulted in empty supermarket shelves following a government price blitz in June last year.
No offshore credit facilities
The Sibanda meeting came after manufacturers had informed government that they could not produce because they did not have enough foreign currency to import critical raw materials, and they could not pay offshore suppliers of raw materials because their foreign currency was locked at the RBZ. The latter had reportedly used the money for food imports and other government obligations, such as payments for diplomatic missions abroad.
Zimbabwean companies are buying from suppliers out of the country on cash terms because they terminated credit lines for Zimbabwean companies due to the political and economic crisis that has worsened the country's credit ranking and increased default risk.
Combining forces
The CZI has grouped with other business associations including the Zimbabwe National Chamber of Commerce (ZNCC), the Chamber of Mines and players in the tourism and hospitality sector for a united appeal to authorities.
“We have written to the Reserve Bank of Zimbabwe explaining that we can't produce until we get our foreign currency to import raw materials. When we did not get a response two weeks ago, we wrote to the Minister of Finance but we still haven't received a response,” said an industry captain speaking on condition he is not named.
“We are now seeking a proper meeting with the Reserve Bank governor and the Ministry of Finance to find out when industry will start accessing its money. It's a clear crisis.”
Crisis to worsen
Independent economic consultant, John Robertson, who called for a united resistance against Mugabe's government, said the situation could only degenerate into a far worse crisis under the incumbent regime.
“They've hurt production and shortages will get worse,” said Robertson, warning that more people were likely to die from hunger this year.
Leaders of the various trade bodies were not available for comment because of the independence holiday on April 18, 2008.
The CZI president Callisto Jokonya was reportedly out of the country, but he had indicated in a newspaper interview before the elections that his organisation had a hit list of targeted industrialists government intended to deal with after the elections.
“Zimbabwe is filled with so much confusion and chaos. Frankly speaking, our members fear more arrests after we heard of that list,” Jokonya was quoted saying by a local business weekly.
The head of the National Incomes and Pricing Commission, Goodwills Masimirembwa, denied the existence of a hit list, but warned, “What are we expected to do when we warn someone and they don't heed the (law)?”
A further deterioration in the manufacturing sector spells doom to the entire economy, already now too dependent on exports.
A CZI survey of the manufacturing sector revealed that capacity utilisation was low at an average of 33,8%, significantly constraining employment creation and export performance.
