Exploring the root causes of the de-industrialization of the Zimbabwe's manufacturing sector (2009-2014)

Abstract

Capacity underutilization is often cited as evidence that Zimbabwe's manufacturing sector is undergoing a process of "de-industrialization". This study proposes that this process can be traced to two interrelated factors: competition from imported products as a result of the dollarization of the economy and the undercapitalization of the firms. The purpose of the study was to measure the extent to which manufacturing firms in Zimbabwe can be said to be "undercapitalized" and to trace the source(s) of capacity underutilization. The study used published financial statements of a stratified random sample of eighteen manufacturing firms listed on the ZSE and concluded that Zimbabwe's manufacturing firms were operating on an aged asset base and were using an inappropriate competitive strategy. This strategy needs to be consciously reversed and new capital needs to be attracted using a modified form of "venture capitalism".