An investigation into the effects of a strengthening US dollar against the South African rand on manufacturing firms in Zimbabwe : The case of Harare(2010 to 2015)

Abstract

The aim of this study was to investigate the effects of the appreciation of the US dollar against the South African Rand on the manufacturing firms in Harare, South Africa being the main trading partner for Zimbabwe. The research study sought to examine the impact of the appreciation of US dollar against the Rand on the performance of the manufacturing firms, its effects on commodity pricing regimes, its impact on firm's competitiveness and the strategies adopted by firm’s in the wake of the continued depreciation of the South African Rand. A positivist approach was adopted in the study. The population in the study were all the manufacturing firms based in Harare and the researcher used stratified random sampling to select the firms from each sub sector on the CZI register of manufacturing firms based in Harare. Purposive random sampling was then employed to select the sample elements.Self administered questionnaires were used to collect data.The study shows that the continued appreciation of the US dollar against the South African Rand has greatly reduced the competitiveness of exporting firms, caused job losses, reduced the profitability of manufacturing firms. Firms adopted multiple survival strategies in the wake of the continued depreciation of the South African Rand and these include reducing production costs, product diversification, sourcing cheaper raw materials mainly from South Africa and China, increasing domestic market, cost containment strategies, aggressive marketing and investing in infrastructure development.The study concludes that the continued appreciation of the US dollar against the South African Rand places exporting firms at a competitive disadvantage and increases competition for local firms from imports as they continue to be cheaper The study recommended the banning of cheap substandard imports, putting in place measures that improves capacity utilisation such as import substitution.