Liquidity crunch bites industry, consumers

LOW local demand caused by the current liquidity crunch that has reduced consumers’ buying power has been blamed as the major capacity constraint in the 2014 manufacturing sector.

BATANAI MUTASA
OWN CORRESPONDENT

Analysts have expressed fears of a disappointing festive season for industry as a result of limited disposable income that has negatively affected business turnover.

According to a Confederation of Zimbabwe Industries (CZI) manufacturing sector survey, local demand overtook working capital constraints as it rose from 17,6% in 2013 to 28,8% in 2014 while working capital recorded a decrease from 40,2% to 26,5% respectively.

Despite a statement by the Consumer Council of Zimbabwe (CCZ) that the low income earner monthly basket fell by 66c to $592,47 in November from $593,13, analysts said this was not likely to improve the performance of business.

CCZ has said consumer spending is generally depressed because people have little disposable income

CCZ has said consumer spending is generally depressed because people have little disposable income

“The reduction is a correctional measure because the dollar was overrated and with the limited resources that people have, prices had to come down to sustain the economy,” said an economic analyst who preferred anonymity.

“What is needed now is a friendly economic environment in the country which will attract investment and see more people getting employed while more money is poured into the economy to enable people to spend more,” she said.

Commenting on the reduction in prices, CCZ executive director Rosemary Siyachitema said while there was a marginal shift in prices, consumer spending was depressed because people had little disposable income while others were being cautious in their spending due to liquidity challenges.

She attributed the decrease to festive season specials being offered by local supermarkets.

The economic analyst noted that business and industry characteristically enjoyed better returns during holiday periods, but raised caution over the inability of employers to pay full salaries and bonuses.

“Without money, the season will invariably be gloomy for industry, business and customers,” Siyachitema said.

The manufacturing industry survey released in October detailed performance of the sector.

It noted other factors, including competition from imports (14,2%), ageing equipment (7,3%), shortage of raw materials (6,2%) and power and water shortages (3,8%), among other things.

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