Business confidence in the manufacturing sector expectedly deteriorated during the first quarter of the year, findings of the 2020 first quarter business conditions survey conducted by the Confederation of Zimbabwe Industries indicate.
According to the survey, business leaders felt the business environment in the first quarter of 2020 was worse than that of the fourth quarter of 2019 and the first quarter of 2019.
They further expect the second quarter of 2020 to be worse than the first quarter of 2020.
The Business Confidence Index (BCI) in the first quarter of 2020 experienced a significant negative turnaround with an overall decrease of -51.5 (quarter on quarter) as compared to the last quarter of 2019.
The BCI fluctuates between -100 and 100. A positive value of BCI indicates business optimism and a negative value indicates pessimism and a value of zero neutrality.
Year on year, the Business Confidence Index fell to -49.9, the survey shows.
This indicates lack of confidence and pessimism of business leaders for both the quarter-on-quarter and year-on-year economic situation.
Meanwhile, managers through the Purchasing Managers’ Index (PMI) also indicated that market conditions are contracting.
The Purchasing Managers’ Index (PMI) is an index of the prevailing direction of economic trends in the manufacturing and service sectors.
It summarises whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting.
A PMI of 50 means that the variable is unchanged, a number over 50 indicates an improvement, while below 50 suggests a decline and if it is less than 42, anticipates a downturn in the national economy.
The overall quarter on quarter PMI for the first quarter of 2020 stood at 25,3, and year on year at 23,1, reads part of the survey report.
According to the survey, the MPI for the first quarter is way below 42, indicating that the purchasing managers view a downturn in the economy due to the impact of covid-19 and lockdowns in addition to an environment that was already fragile before the occurrence of the pandemic.
Capacity utilisation has also continued to deteriorate during the first quarter of 2020 and business leaders expect it to decline further during the second quarter of 2020 due to pre-existing macroeconomic fragilities and the lagged effects of covid-19 and the subsequent containment measures implemented to fight the pandemic (lockdowns).
To recover, CZI suggests that both business and Government need to pursue import-substitution industrial policies for local supply and production of critical raw materials and products.
“The local industry should take advantage of the absence of some imported products to recapture the domestic market and improve on quality and pricing of local products.
“Government on the other hand should ensure a conducive ease of doing business environment, coupled with addressing the issues of macroeconomic stability, infrastructure bottlenecks, and key enablers for the local industry to become competitive in preparation of an export-led industrialisation strategy post covid-19 and lockdowns.