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Companies reel under crippling costs, regulatory chaos

by Staff reporter
13 hrs ago | Views
Zimbabwe's formal business sector is under severe strain as economic pressures mount, with industry leaders warning that ongoing policy inconsistencies, regulatory confusion, and worsening macroeconomic instability are putting many companies at risk of collapse.

Executives across various industries say most firms are now in "survival mode," cutting jobs, downsizing operations, and postponing expansion plans amid a hostile and unpredictable business environment.

Tapiwa Karoro, president of the Zimbabwe National Chamber of Commerce (ZNCC), painted a grim picture of the current landscape and urged the government to enact urgent reforms to restore investor confidence, stimulate growth, and prevent deeper economic decline.

"Unlocking business potential begins with clear, consistent, and credible policy," Karoro said. He emphasized the importance of using the National Development Strategy 2 (NDS2) as a platform to review the successes and failures of NDS1, calling for evidence-based adjustments and course corrections.

Karoro stressed that resolving Zimbabwe's complex currency regime is critical. He advocated for a market-driven transition toward a mono-currency system built on confidence rather than forced administrative measures, warning that abrupt policy changes only erode trust.

The regulatory environment also came under sharp criticism. Karoro described the current system as overly complicated, fragmented, and costly, with businesses forced to navigate a maze of overlapping licenses, permits, and levies that often contradict each other. This regulatory burden raises operating costs, deters investment, and discourages formalisation, particularly among micro, small, and medium enterprises (MSMEs). He called for urgent reform through digitization, harmonisation, and the establishment of a one-stop compliance platform under NDS2.

Karoro also urged the government to reduce its commercial role and allow markets to function more freely, highlighting the need for greater liberalisation of financial and commodity markets to enable sustainable price discovery and efficient resource allocation.

The economic pressures facing businesses are evident in recent financial results and strategic retrenchments. Itai Pasi, chairperson of CFI Holdings, cited liquidity shortages, rising operating costs, and the growing informal retail sector as key challenges undermining formal businesses. Several leading retailers have scaled down operations in response.

Agriculture has also felt the strain. Ariston Holdings reported increased input costs for electricity, fertilisers, and crop chemicals, though investments in solar power at its Southdown Estate have helped mitigate some costs. Nonetheless, rising grid electricity tariffs have tempered these benefits, according to chairman Alexander Crispen Jongwe.

British American Tobacco Zimbabwe (BAT), previously one of the more stable players, suffered a significant loss in 2024 amid currency volatility and policy uncertainty. The company recorded a 23% drop in revenue to US$36.4 million and swung from a US$9.1 million profit in 2023 to a US$7.1 million loss. BAT Zimbabwe chairperson Lovemore Manatsa described 2024 as one of the most difficult operating periods in recent memory, citing currency shocks, supply chain bottlenecks, and hard currency shortages as major disruptors.

Despite these challenges, Manatsa noted that BAT managed to navigate the transition between the Zimbabwe Dollar, Zimbabwe Gold currency, and the US dollar, demonstrating resilience in a tough environment.

For Karoro and other business leaders, addressing Zimbabwe's economic challenges requires bold, coordinated public-private partnerships focused on trust, shared goals, and accountability. Key enablers such as infrastructure development, energy security, and digital transformation must be prioritised through joint efforts.

Regional integration through the African Continental Free Trade Area (AfCFTA) also presents a significant opportunity to expand exports, diversify the economy, and align Zimbabwe's policies with continental standards.

However, economic competitiveness remains fragile. Manufacturing capacity utilisation is below 60%, labour productivity lags regional peers, and informal sector dominance undermines formal growth. Karoro stressed the need for focused investment in skills development, industry retooling, technology adoption, and formalising the informal economy to foster competitive, sustainable growth.

He further highlighted the importance of strengthening institutions to uphold the rule of law, protect property rights, and fight corruption as essential for rebuilding investor confidence. Transparency and accountability in public resource management were also flagged as critical to improving credibility and efficiency.

As Zimbabwe faces intensifying economic headwinds, the private sector is prepared to play a transformative role—if government delivers the right policy framework. For many business leaders, the implementation of NDS2 represents a pivotal moment to reset the economy through smart regulation, catalytic investment, and productivity-led growth.

Source - Business Times