Wednesday, July 23, 2008
By Martin Kadzere
THE manufacturing of the Bacossi goods by local manufacturing firms will boost capacity utilisation while creating more jobs, economists have said. It is also an opportunity for "a good take off" by small to medium businesses involved in the production of raw materials and goods being distributed under the facility. But it should be "a short-term plan" which should not run for more than three months. A holistic approach was needed to create an enabling environment that allows companies to operate on their own.
Last week, President Mugabe launched phase one of Bacossi to the People where several basic goods, all imported, were distributed to rural communities. Imports were made with assistance from Russia, Ukraine and Namibia.
The Reserve Bank said it would procure raw materials and contract companies to produce basic goods on its behalf under toll manufacturing (1) arrangements. To cut the import costs, Reserve Bank governor Dr Gideon Gono said last week the central bank would enter into toll manufacturing with local firms.
"We want to engage companies to produce for the State and become viable in the process," said Dr Gono.
Economists said this would enhance capacity utilisation for most companies involved in manufacturing basic commodities while creating more jobs.
They said it would not make sense for the Reserve Bank to continue importing finished goods when it can actually import raw materials for processing here.
"Small to medium and large entities will benefit. Zimbabwean firms have the capacity and its good to capacitate them through toll manufacturing," said an analyst with a local bank.
Capacity utilisation for most companies has declined to levels below 20 percent as a result of foreign currency shortages to import raw materials while power outages, water cuts and price distortions have affected viability.
"I think it’s a good short-term measure. While it ensures increased availability of goods on the market at affordable prices, it also enhances capacity utilisation of companies . . . and not only that, but also creates more jobs," said one economist.
While the Reserve Bank would want the commodities to be affordable to many, as the Bacossi facility seeks to, fees earned from toll manufacturing should be sufficient to cover overheads incurred by firms.
Government, through the Reserve Bank of Zimbabwe, has disbursed funds under various facilities to capacitate business but the supply situation has actually worsened.
1) toll manufacturing
Definition: Arrangement in which a firm (which has a specialized equipment) processes raw materials or semi-finished goods for another firm. Also called toll processing.