CZI urges companies to reduce idle capacity

Confederation of Zimbabwe Industries (CZI) chief executive officer, Ms Sekai Kuvarika, has called on Zimbabwe's manufacturing sector to reduce unutilised capacity as a key strategy to lower production costs, improve efficiency, and expand export potential.

Addressing delegates at the International Business Conference held during the Zimbabwe International Trade Fair (ZITF) last week, Ms Kuvarika warned that underutilisation of installed industrial capacity continues to undermine the sector's cost structure and international competitiveness. The conference was held under the theme "Revitalising Industrialisation for Zimbabwe's Economic Resurgence."

Ms Kuvarika explained that a significant share of idle capacity across local industries was originally installed to serve export markets, making its revitalisation a strategic lever for economic recovery. She noted that underutilised capacity inflates fixed costs such as rentals, maintenance, depreciation, property taxes and insurance, which are then borne by a much smaller output base.

"Fixed costs are spread on smaller output produced from 55 percent capacity instead of 100 percent," she said. "With a linear output-capacity utilisation relationship, a 45 percent unutilised capacity in our manufacturing sector increases the fixed cost per unit by at least 80 percent."

She emphasised that reducing idle capacity would increase economies of scale, lower per-unit production costs, and enhance the sector's ability to compete on both domestic and international markets.

"This will improve the competitiveness of our exports and, in turn, increase the demand for our products in foreign markets," said Ms Kuvarika. "For many firms, a significant portion of the idle capacity was installed for the export market. Hence, there is an opportunity to increase the production of exportable goods through the utilisation of excess capacity."

Beyond firm-level benefits, Ms Kuvarika stressed the broader economic implications, including output growth, efficiency gains, better labour utilisation, employment creation, and higher foreign currency earnings.

She also highlighted the importance of improved competitiveness under the African Continental Free Trade Area (AfCFTA), warning that Zimbabwe risks missing out if industrial performance does not align with regional trade dynamics. "Improving the competitiveness of manufacturing firms is not only crucial for improving the export revenue of the country, but is also critical for preserving jobs when implementing the African Continental Free Trade Area (AfCFTA)," she said.

To reduce idle capacity, Ms Kuvarika advocated for supportive policy reforms that lower the cost of production and the burden of regulations. "Reducing the cost of production and the cost of regulations can reduce the idle capacity," she said. "We think this option will help reduce idle capacity without significant loss of tax revenue since some tax and fee cuts may be replaced by an increase in output and revenue-related taxes like VAT."

Despite existing potential, Zimbabwe's manufacturing sector currently exports only five percent of its total output — a figure Ms Kuvarika described as a lost opportunity given the remaining 47 percent of idle capacity that could be redirected toward exports.

Looking ahead, she called for an aggressive drive toward technological advancement and product innovation to meet the quality demands of global markets. "Moving up the quality chain beyond the value chain will introduce sophistication of our products for export markets and this requires an aggressive technology and innovation drive by both industry and policy," she added.

Ms Kuvarika's remarks come amid growing calls for a revival of Zimbabwe's industrial base as a cornerstone of economic growth and regional integration under the AfCFTA framework.