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Rand slide hits Zimbabwe’s exports to South Africa

Textile companies in Zimbabwe have suspended exports to South Africa due to the depreciation of the South African rand. The rand has been on a steady slide against the dollar. Due to exports suspension, some of Zimbabwe’s mills have reduced their working periods. As a result, capacity utilisation has gone down to around 30 per cent. Capacity utilisation in the industry last year declined to 34.3 per cent from 36.5 per cent in 2014.

South Africa has traditionally been a strong market for Zimbabwe’s textile industry. Since Zimbabwe is using a strong currency, the weakening of the rand and other regional currencies means that exports have become more expensive compared to cheap imports. The situation has been compounded by high production costs locally, which further erode earnings in a squeezed domestic market.

Currently, the textile industry in Zimbabwe employs less than 5,000 people and it’s possible the figure might shrink further due to low production levels. At its peak the textile industry employed about 30,000 workers.

The challenges facing the textile industry are mainly working capital and subdued aggregate demand due to issues of liquidity, stiff competition from imported products, and obsolete equipment.