By Oliver Kazunga
Bulawayo based firm, Archer Clothing, says it is struggling to secure foreign currency to boost its operations and has complained over the suspension of the export incentive.
The export incentive, which was introduced under the bond note facility in 2016, fell by the way side when Government in February this year dumped the parity rate between the surrogate currency and the greenback in favour of the interbank exchange system.
Paramount Garments managing director, Mr Jeremy Youmans, told Business Chronicle that despite their growth, Archer was not spared from foreign currency constraints.
“We are currently employing 937 employees. We are struggling to access sufficient foreign currency to fund operations and the growth forecast,” said Mr Youmans.
“While we are constrained by the electricity situation, we are getting by but the growth needs to be financed in advance and we are not sure how this will be achieved and at any great pace.”
At the time of the takeover, Archer employed about 200 workers.
The company has maintained a positive growth trajectory despite macro-economic challenges after creditors approved its takeover by a Harare-based Paramount Garments in 2015.
This has seen the firm withstanding major hurdles facing the manufacturing sector such as rising production costs and power outages.
Mr Youmans however, said Archer Clothing was operating at 44 percent in terms of capacity utilisation due to an inadequate electrical infrastructure supplying the factory.
“We are working with Zesa to import the necessary equipment but the process is taking a very long time.
“Once the electrical infrastructure is in place, we can restart training of workers to fill up the other 56 percent,” he said.
Mr Youmans said the change in policy to force exporters to surrender 20 percent of their export earnings has exacerbated the challenges they were facing.
“It has also had an impact on export pricing such that we are now supplying at a loss on some items due to the surrender and sudden removal of the export incentive, which was put in place to make us more price competitive.
“We have committed to contracts with more competitive pricing but have now had these two significant increases to our costs,” he said.
Before being taken over by Paramount Garments, Archer Clothing was battling operational challenges that saw it being placed under judicial management in 2010 and provisional liquidation in 2014 due to lack of working capital before scaling down operations, leaving hundreds of workers redundant. The Chronicle