Capacity utilization rises 3.6 percent in Q2

Capacity utilization in large manufacturing and mining companies rose by 3.6 percent in the second quarter of 2023 humstrung by power shortages among other challenges, a
recent Zimstat survey has found.

The data is contained in the Zimbabwe Statistics Agency (Zimstat) Business Tendency survey report for the second quarter covering April to June this year released on Friday.

According to Zimstat, capacity utilization for large firms rose slightly to 54.7 percent during the second quarter of 2023 from 51.1 percent in the first one, while that for medium and small companies in the manufacturing sector was 47.4 percent.

The findings of the survey are based on responses obtained from 379 manufacturing and 52 mining companies.

Power shortages, cash flow challenges and an uncertain business environment are cited as major constrains to production in the manufacturing and mining sectors as they recorded a mixed bag in performances during the period under review.

Zinstat conducts the survey to produce indicators for use in monitoring the current business situation and short-term developments in the manufacturing and mining sectors.

“For small and medium companies in the sector, capacity utilization reduced to 44.7 percent from 45.2 percent recorded in first quarter 2023. Second quarter capacity utilization for the mining sector was 51.1 percent, an increase from 48.8 percent during first quarter 2023,” said ZIMSTAT.

The response rates for the survey were 51.5 percent for the manufacturing sector and 47.6 percent for the mining sector, giving a
combined response rate of 51 percent with key indicators produced including Capacity Utilization, Purchasing Managers’ Index (PMI), Manufacturing Confidence Index and Mining Confidence Index.

According the Zimstat survey report, values of the PMI range from 0 to 100, with those above 50 reflecting an expansion in the sector and below 50 signifying a contraction. The further away from 50 the greater the level of change.

A positive value of the confidence index reflects optimism towards the business conditions while a negative value implies pessimism and zero implies no change. The Manufacturing Confidence Index went down from 7.3 in first quarter 2023 to 3.5 in second quarter 2023 indicating less optimism about the business environment while the Mining Confidence Index decreased to 12.7 in second quarter 2023 from 14.2 in first
quarter 2023. Manufacturing Sector’s PMI for the quarter 2023 was 40.1, reflecting a 3.3-point increase from the first quarter value of 36.8.

About 25 percent of the respondents in the manufacturing sector showed more optimism towards the general business climate for third quarter 2023 while 27 percent in the mining sector were of the same view.

In the manufacturing sector, 42.6 percent of respondents viewed production levels over second quarter 2023 as having remained unchanged, while 20.6 percent were of the opinion that the levels had increased.
For the mining sector, 54 percent of the respondents had the perception that production levels had remained the same over second quarter 2023.

At least 42 percent of respondents in the manufacturing sector were expecting an increase in production levels during third quarter 2023. About 39 percent of the respondents in the non-metallic mineral products sub-sector had the perception that the production level would decrease
over the third quarter of 2023, while half of those in the drinks, tobacco and beverages and transport and equipment sub-sectors expected the production level to remain unchanged.

In the mining sector, 54 percent of respondents were expecting an increase in production levels during third quarter 2023.
Excluding seasonal variations, 69 percent of respondents in the manufacturing sector and 75 percent in mining, reported their firms’
total employment as having remained unchanged during second quarter 2023. Excluding seasonal variations, 78.8 percent of respondents in the mining sector, anticipated their firms’ total employment to remain unchanged in third quarter 2023.

All manufacturing sub-sectors had more than 50 percent of the respondents reporting that they anticipated the employment level to
remain the same in third quarter 2023. Respondents in the mining sector that did not anticipate any change in total employment during second quarter 2023 comprised 79 percent.

Confidence indices are compiled using an average of the balances of questions relating to production expectations, total order books and stocks of finished goods. Methodological guidelines used in undertaking the survey were obtained from the United Nations Handbook on Economic
Tendency Surveys as well as the Organization for Economic Co-operation and Development Handbook on Business Tendency Surveys.

New Ziana