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Recapitalisation of the Mining and Manufacturing Sectors Key to Zimbabwe's Economic Recovery States Frost & Sullivan - Stable macroeconomic and political environment crucial to continued growth
Recapitalisation of the Mining and Manufacturing Sectors Key to Zimbabwe's Economic Recovery States Frost & Sullivan

 

NewswireToday - /newswire/ - Cape Town, South Africa, 2011/06/22 - Stable macroeconomic and political environment crucial to continued growth.

   
 
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After a decade of decline, Zimbabwe's economy is recovering. The economy recorded 8.7% growth in 2010 and is forecast to grow by a further 9.3% in 2011. This growth is supported by an increase in production output of the country's mining sector.

New analysis from Frost & Sullivan (industrialautomation.frost.com), Production and Investment Trends in the Zimbabwean Mining and Manufacturing Industries, finds that the mining industry is the main driver for the Zimbabwean economy, with export receipts in the sector reaching $1.70 billion in 2010. The manufacturing industry generated approximately $400 million in exports receipts in 2010, supported by growth in the beverages and cement sectors.

"Significant capital injection is required to revive the industry to pre-2000 levels of production output and expand it further. This is chief among the factors expected to contribute to the recovery of Zimbabwe's mining and manufacturing sectors," notes Frost & Sullivan's IPC Industry Analyst Charles Shonayi.

The Chamber of Mines estimates that the country's mining sector now requires $6 billion for the recapitalisation. "This will largely be channelled towards refurbishing processing plants, equipment and machinery."

The dollarization of the economy and the abolishment of all surrender requirements to the Reserve Bank from 19 March, 2009, has improved the business environment and helped Zimbabwean businesses in managing their foreign currencies in order to enhance their competitiveness in the world market.

Furthermore, the liberalisation of the gold sector, has allowed gold mines that had suspended operations to resume production. The government anticipates gold production to increase to 13 tonnes in 2011.

In 2010, the Zimbabwe mining sector recorded a 46.0 per cent increase in production output and is expected to grow by a further 44.0 per cent in 2011.This is against the background of rising international commodity prices.

Mining and manufacturing companies in Zimbabwe are, however, expected to continue to struggle to raise funds to start or expand operations during the short term. Plant refurbishment requires substantial amounts of capital investment, and this places additional pressure on the investment and operating costs.

"The Zimbabwean capital market at present is lacking liquidity, and the absence of significant, reasonably priced long-term borrowings is placing constraints on capital expenditure projects," states Shonayi. "Most companies are funding their projects largely from operations or are borrowing at exorbitant interest rates which is not sustainable in the long run. Access to fresh foreign capital remains a challenge following the country's radical indigenisation policy.

Capital expenditure towards rehabilitation of plant and equipment is anticipated to be very high, as a result of many years of non investment, to replace ageing and obsolete equipment in the manufacturing and mining industry. "Investment in plant and equipment combined with strategic partnerships will remain the key to the growth of companies in the manufacturing and mining industries," says Shonayi. "It is imperative for companies to seek partnerships to secure constant supply of feedstock and capitalise on the available opportunities."

"Political stability in Zimbabwe is crucial to the improvement in the investment climate in the economy," comments Shonayi. "This will provide a clear indication to investors and international financiers that the Government is committed to improving its governance and transparency."

If you are interested in more information on this study, please send an email with your contact details to Samantha James, Corporate Communications, at samantha.james[.]frost.com.

Production and Investment Trends in the Zimbabwean Mining and Manufacturing Industries is part of the Industrial Automation & Process Control Growth Partnership Service programme, which also includes research in the following markets: Production and Investment Forecasts in the South African Food and Beverages Industry, Production and Investment Forecasts in the South African Cement Industry and Production and Investment Forecasts in the South African Coal Industry. All research included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.

About Frost & Sullivan
Frost & Sullivan (frost.com), the Growth Partnership Company, enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best-practice models to drive the generation, evaluation, and implementation of powerful growth strategies. Frost & Sullivan leverages 50 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 40 offices on six continents.

Production and Investment Trends in the Zimbabwean Mining and Manufacturing Industries / M68E

 
 
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Recapitalisation of the Mining and Manufacturing Sectors Key to Zimbabwe's Economic Recovery States Frost & Sullivan

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