Zimbabwe SMEs crushed by annual compliance fees

Small and medium enterprises (SMEs) in Zimbabwe are buckling under the weight of steep compliance costs - some as high as US$10,000 annually - raising alarm over a regulatory environment that is driving businesses deeper into informality.

Findings from the National Competitiveness Commission (NCC) have revealed that the high cost of regulatory compliance is one of the main barriers preventing SMEs from formalising. The burden is so heavy that in some sectors, businesses are required to part with over US$8,000 before they can even start operating, worsening the already rampant informalisation of the economy.

The informal sector is now estimated to contribute between 65% and 70% of economic activity, a trend experts say is unsustainable and directly linked to the country's inefficient regulatory framework.

Sekai Kuvarika, CEO of the Confederation of Zimbabwe Industries (CZI), said the current system disproportionately penalises small businesses that lack the capital to meet uniform compliance obligations.

"Most of these SMEs are not even capitalised to that extent. They don't have that kind of turnover," she said. "So what exactly are we saying? We are saying they shouldn't be there, because some of the violations would actually cause the SME to be closed."

She highlighted that regulatory fees do not take into account the size or capacity of businesses, which results in a one-size-fits-all model that is particularly harsh on start-ups and smaller operators.

"If you say ‘an SME', the cost is what the entity charges, not what a certain size of business should be charged," said Kuvarika. "There isn't a segmentation of the costs."

These costs, combined with policy inconsistencies, outdated legislation, and bureaucratic inefficiencies, are discouraging new entrants, innovation, and competition in the economy. Of the country's more than 2,000 laws, a staggering 72% are over 30 years old.

Deputy Minister of Industry and Commerce Rajeshkumar Modi acknowledged the serious impact of Zimbabwe's regulatory framework on business growth.

"Despite Zimbabwe's comparative advantages - natural resources, a skilled workforce, and a strategic location - the country's competitiveness remains hampered by excessive regulatory burdens, high labour and energy costs, limited access to affordable finance, and poor infrastructure," he said.

In response, the government is prioritising regulatory reform through the implementation of a Regulatory Impact Assessment (RIA) initiative. The programme, jointly launched by the NCC, CZI, and the National Economic Consultative Forum (NECF), is designed to evaluate the costs, benefits, and unintended effects of current regulations.

"The Regulatory Impact Assessment is a tool for improving the quality of regulation and advancing inclusive and sustainable development," said Modi. "It will help streamline processes, reduce costs, and improve efficiencies in how we regulate our economy."

The RIA process was launched through a tripartite dialogue involving government, the private sector, and civil society. A recent stakeholder meeting brought together local policymakers and experts from South Africa to share best practices and reinforce Zimbabwe's commitment to a reformed business environment.

Already, compliance accounts for up to 18% of overhead costs in some SMEs - well above global benchmarks. Without urgent reform, experts warn, the country risks stifling its most dynamic economic actors.

As Zimbabwe charts its path towards becoming an upper-middle-income economy by 2030, industry players stress that the success of this vision hinges heavily on enabling SMEs to thrive through fair, transparent, and inclusive regulation.

"Right now, we're locking out the very people who could drive innovation, job creation, and growth," said Kuvarika. "It's not just about reducing costs. It's about unleashing the potential of Zimbabwean entrepreneurs."