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Viewing cable 09HARARE847, ZIMBABWE MANUFACTURING EXPANDS, BUT FIRMS REMAIN

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Reference ID Created Released Classification Origin
09HARARE847 2009-10-26 09:59 2011-08-24 16:30 UNCLASSIFIED Embassy Harare
VZCZCXRO9890
PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0847 2990959
ZNR UUUUU ZZH
P 260959Z OCT 09
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC PRIORITY 5057
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHNR/AMEMBASSY NAIROBI 5720
RUEAIIA/CIA WASHDC
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHMFISS/EUCOM POLAD VAIHINGEN GE
RHEFDIA/DIA WASHDC
UNCLAS HARARE 000847 
 
SIPDIS 
 
STATE PASS TO USAID FOR J.HARMON AND L.DOBBINS 
 
 
E.O. 12958: N/A 
TAGS: ECON ZI
SUBJECT: ZIMBABWE MANUFACTURING EXPANDS, BUT FIRMS REMAIN 
PESSIMISTIC 
 
1. Summary: A new survey of manufacturers delivers more evidence of 
economic recovery in Zimbabwe.  Capacity utilization among 
manufacturers rose from less than 10 percent in the first half of 
2007 to just over 32 percent in the first half of 2009.  But despite 
the improvement, less than 10 percent of the 150 firms surveyed were 
optimistic about future prospects for manufacturing.  End summary. 
 
2. New survey results show signs of recovery in Zimbabwe's 
manufacturing sector.  A study just released by the Confederation of 
Zimbabwe Industries (CZI) shows that capacity utilization among 
manufacturing firms increased significantly in the first half of 
2009 compared to the same period in 2007.  The CZI survey shows that 
capacity utilization rose from below 10 percent of installed 
capacity in 2007 to an average of 32.3 percent in 2009.  As a result 
of the improvement in capacity utilization, the survey found that 
89.2 percent of 150 sampled firms recorded growth in manufacturing 
output compared to first half of 2007. 
 
3. In spite of the improvement in capacity utilization, many firms 
surveyed pointed to a number of constraints bedeviling the 
manufacturing sector.  Of the sampled firms, 32.5 percent said they 
were constrained by the low availability and high cost of working 
capital.  Only 17 percent of the sampled firms undertook meaningful 
investments during the first half of 2009.  Just over 25 percent of 
the sampled firms pointed to low domestic demand arising from very 
low salaries as the most important constraint to operating at full 
capacity, while 13 percent of the firms identified the shortage of 
inputs as a major constraint to improving capacity utilization. 
Power shortages and antiquated equipment were also identified as 
having been responsible for low capacity utilization levels by 6.5 
and 5.9 percent of the sampled firms respectively. 
 
4. The survey also shows that decline in manufactured exports 
continued but the rate of decline slowed from 35 percent during the 
first six months of 2007 to just 5 percent during the period under 
review.  Most firms stated that their products could not compete in 
foreign markets because of high production costs associated with 
high labor costs, very high utility charges, and lack of long term 
credit. 
 
5. Overall, only 9.5 percent of the firms surveyed were optimistic 
about future prospects within the sector while the majority (67.4 
percent) was indifferent and 23.4 percent were pessimistic. 
 
 
6. Comment: Like Zimbabwe's economy as a whole, manufacturing is 
improving because there was no place to go but up.  And there is 
anecdotal evidence that recovery continued beyond the first six 
months of this year.  Sustaining that recovery will be difficult, 
however, as long as political risk discourages external capital 
flows to Zimbabwe's private sector. 
 
Petterson