TRYNESS TEMBO, Lusaka
ZAMBIA’S manufacturing sector has witnessed positive trends in the first half of the year backed by improved macroeconomic fundamentals and stable power supply.
Lately, macroeconomic fundaments are pointing in the right direction as the Kwacha has been hovering around K9.00 since the opening of the year while inflation and interest rate are at 6.6 percent and about 25 percent respectively.
Zambia Association of Manufacturers (ZAM) acknowledges that the sector has presented signs of recovery in the first half of the year.
Last year, the sector was negatively, affected by load-shedding, weak Kwacha and high interest rates, among others.
In response to a query yesterday, ZAM chief executive officer Chipengo Zulu said more consistent supply of electricity and improved stability in the currency has made planning more predictable.
“The manufacturing sector has shown signs of recovery in the first half of the year following harsh economic conditions and the noted increased cost of doing business in the preceding year,” she said.
Ms Zulu, however, said the recent electricity hike of 50 percent and 25 percent has been a huge blow to the manufacturing sector.
“We will continue to advocate for a gradual approach to the implementation of cost-reflective tariffs for the sector, to allow companies to gradually adjust their cost structures and enable them to survive and contribute positively to economic development,” she said.
Ms Zulu urged Zesco Limited to conduct a comprehensive impact assessment on the effects of cost-reflective tariffs on the sector, saying the cost of energy is hindering the growth potential of the sector.
“The assessment will demonstrate the negative implications of the rapid adjustment on a number of manufacturing firms, and the need to adjust the approach in moving to more cost-reflective tariffs,” she said.
ZAM highlights other challenges as high taxes such as the introduction of the five percent surtax, an additional tax on something already taxed, such as a higher rate of tax on incomes above a certain level on inputs introduced by the Ministry of Finance in the 2017 national budget.
Ms Zulu said despite the measure intended to support local industry, the outcome has been quite the opposite as many inputs listed on the surtax are inputs used in the local production process, thus making manufacturing relatively expensive.