The apex Organisation for Industry in Zimbabwe, the Confederation of Zimbabwe Industry (CZI) has asked the government to enact laws to cut salaries and utility costs after the plunging currencies of neighbors South Africa and Zambia made them noncompetitive.
Zimbabwe abandoned its own currency, the Zimbabwe dollar, in 2009 in favor of the use of a number of currencies, mostly the U.S. dollar, after it was ruined by hyperinflation, which hit 500 billion percent in 2008. The economy has halved since 2000, according to the government, and low-cost imports have contributed to 11 consecutive months of deflation.
“We are trying to have prices of salaries and utilities moved downwards through a legal instrument,” Busisa Moyo, the president of the CZI, which represents the country’s biggest industrial companies, told Bloomberg by phone on Tuesday. “Prices of goods and services can be forced downwards by 25 percent to 30 percent.”
The Zambian kwacha has fallen by 57 percent against the dollar over the past three years while the rand has slumped 37 percent. Imports from Zambia have an 8 percent market share of Zimbabwe’s manufactured goods market, compared with 4 percent last year, while South Africa has a 37 percent share, the CZI said in a report released on Wednesday.
“The crash of the South African rand and the Zambian kwacha has caused more complex challenges to the Zimbabwean economy,” the CZI said in the report. “There have been calls to devalue internally and CZI has gone some strides in exploring the possibility of such an initiative given that Zimbabwe is using a stronger currency.”
Zimbabwean factories are currently using only 34.3 percent of their capacity compared with 36.5 percent a year ago, the CZI said.
Read CZI’s Manufacturing Sector Survey 2014 here.