Industry sweats over drop in aggregate demand

 Industry sweats over drop in aggregate demand
Ministers follow Proceedings during the business conference at the ZITF in Bulawayo yesterday. (Picture by Eliah Saushoma)
Published: 25 April 2019
MANUFACTURING industries have expressed concern over the recent drop in aggregate demand saying this has a knock-on effect on production levels and investment by local companies.

The captains of industry said yesterday that the trend which is as a result of rampant price increases of basic commodities, which have resulted in skyrocketing cost of living, was threatening their viability.

The Consumer Council of Zimbabwe (CCZ), in its latest update, revealed that the cost of living for a family of six had increased from RTGS$781, 35 in February to $790, 77 recorded by end of March.

The rise in the cost of living means that consumers' disposable incomes get eroded and thus companies would not produce more goods as customers will not have enough disposal income to buy the commodities.

Speaking during the International Business Conference in Bulawayo yesterday, Confederation of Zimbabwe Industries (CZI) president, Mr Sifelani Jabangwe, said the manufacturing sector performance is under threat due to the prevailing macro-economic environment.

"In 2019, the manufacturing sector performance is unfortunately under threat. Industry is a bit pessimistic about the current macro environment.

"The slowdown in the economy is being exacerbated by the declining aggregate demand, which also ties in the pricing of goods and services. We have got a number of big corporates advising us that they are feeling the pressure and our fear is that this might hit the exports, which unfortunately would exert pressure on the exchange rate."

Mr Jabangwe said the liberalisation of the foreign exchange market was welcome by industry as this was what the private sector had requested for in order to address the foreign currency shortage.

In the 2019 monetary policy statement presented in February, the Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya introduced the interbank foreign exchange market to formalise trading through banks and bureau de change of United States dollars and other currencies including RTGS dollars on a willing buyer, willing seller basis.

Dr Mangudya said the introduction of the interbank system was also meant to ensure RTGS balances, bond notes and coins were immediately denominated as RTGS dollars to bring sanity and balancing the economy.

Mr Jabangwe however said the challenge of the interbank foreign exchange market was the issue of liquidity.

"We believe that the introduction of a local currency will promote competitiveness for locally produced goods and also promote local goods on the export market. We also expect that this will help to switch expenditure on imports to local production and also incentivise exporters," said Mr Jabangwe.

He said the number of sellers at the interbank market were limited while buyers were in abundance and as such the foex available was also limited.

Mr Jabangwe said their inquiries had established that the sellers were not happy with the prevailing exchange rate hence the limited number of sellers.

"Then we have got the issue of the 20 percent liquidation. The exporters are saying that what is hurting them is the surrender that is happening at a rate which they are not happy with and this is resulting in them having sub-economic returns," he said.

Mr Jabangwe said exporters had also highlighted that the 30-day export earnings retention period needs to be extended a little bit because 30 days was too short a period for them, particularly large exporters, to be able to plan, set up large corporate projects or buy what they require.
- chronicle
Tags: Industry,

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