Companies reel under crippling costs, regulatory chaos

LIVINGSTONE MARUFU

Zimbabwe’s formal business sector is buckling under intensifying economic pressure, with industry leaders warning that persistent policy inconsistencies, regulatory chaos, and deepening macroeconomic instability are threatening their survival.

Most companies are now operating in “survival mode,” shedding jobs, scaling down operations, and shelving expansion plans amid what executives describe as a hostile and unsustainable business environment.

Zimbabwe National Chamber of Commerce (ZNCC) president Tapiwa Karoro painted a stark picture of the current operating climate, urging government to implement sweeping reforms to restore investor confidence, unlock growth, and avert deeper economic deterioration.

“Unlocking business potential begins with clear, consistent, and credible policy. National Development Strategy [NDS] 2 must build on a frank and evidence-based review of NDS1—identifying what worked, what fell short, and where course correction is necessary,” Karoro told Business Times.

“The resolution of Zimbabwe’s currency regime remains paramount. A mono-currency system should be the long-term goal, but this must be market-driven, guided by confidence—not compulsion. Abrupt administrative impositions erode trust. What we need is a sequenced, transparent transition underpinned by strong fundamentals.”

Karoro also took aim at the costly and convoluted regulatory environment choking enterprise growth.

“One of the most persistent obstacles to doing business in Zimbabwe is the overly complex, fragmented, and expensive regulatory compliance regime,” he said. “Firms must navigate a maze of licenses, permits, levies, and reporting requirements from overlapping authorities—many of which duplicate functions or even contradict one another. This regulatory bloat increases the cost of doing business, deters investment, and discourages formalisation, particularly among MSMEs.”

He called for urgent regulatory reform through digitisation, harmonisation, and the establishment of a one-stop, low-cost compliance platform under NDS2.

Karoro further urged government to scale back its commercial footprint and allow markets to function freely.

“Markets—both financial and commodity—must be further liberalised to allow sustainable price discovery and effective resource allocation,” he said.

The dire economic conditions are already playing out in financial disclosures and strategic retrenchments across key sectors. Several firms reporting half-year and full-year results have flagged eroded profitability, rising operating costs, and declining competitiveness.

CFI Holdings chairperson Itai Pasi cited liquidity shortages and the rise of informal trading as major headwinds.

“The first half of the year witnessed tightened liquidity conditions and high operating costs, notably human capital and power costs. This, coupled with the pronounced informalisation of the retail sector, negatively impacted the performance of the formal retail sector, with several leading retailers scaling down operations,” Pasi noted.

In the agriculture sector, Ariston Holdings also reported operational strain.

“Operations were impacted by rising input costs for electricity, fertilisers, and crop chemicals, although solar power adoption helped mitigate some of these pressures,” said Ariston chairperson Alexander Crispen Jongwe.

The group commissioned a solar energy plant at its Southdown Estate in July 2023 to reduce reliance on costly diesel generators. However, Jongwe said escalating grid electricity tariffs diluted some of the benefits.

British American Tobacco Zimbabwe (BAT), once one of Zimbabwe’s more stable corporate players, posted a significant loss as currency volatility and erratic policies hammered earnings.

“The group changed its functional currency during the period. This resulted in hyperinflation-related accounting adjustments, including a monetary loss, which impacted reported profit,” said BAT Zimbabwe chairperson Lovemore Manatsa.

Describing 2024 as “one of the most difficult operating periods in recent history,” Manatsa cited currency shocks, policy uncertainty, and hard currency shortages as key disruptors.

“In 2024, the business navigated a challenging operating environment, largely driven by the negative effects of commodity price shocks, policy uncertainty, supply chain bottlenecks, and hard currency shortages. Despite these challenges, the business successfully transitioned from the Zimbabwe Dollar (ZWL) to the Zimbabwe Gold (ZWG), and subsequently to the United States Dollar (USD), demonstrating resilience in the face of economic headwinds whilst driving business continuity,” he said.

BAT’s revenue tumbled 23% to US$36.4 million in 2024, down from US$47.2 million in 2023. The company swung from a profit of US$9.1 million to a loss of US$7.1 million over the same period.

For Karoro and the wider private sector, the way forward requires bold, coordinated action.

“Unlocking Zimbabwe’s potential cannot be achieved by government or business alone. It calls for deepened public-private partnerships rooted in trust, shared goals, and accountability,” Karoro stressed.

He said key enablers such as infrastructure development, energy security, and digital transformation must be prioritised through joint planning and execution.

“Equally, regional partnerships—particularly under the African Continental Free Trade Area (AfCFTA)—present a golden opportunity to integrate value chains, expand exports, and diversify our economic base. Zimbabwe must position itself as a competitive regional player by aligning policies and standards with continental frameworks,” he said.

Yet Zimbabwe’s economic competitiveness remains fragile. Manufacturing capacity utilisation is still below 60%, and labour productivity lags behind regional peers. Karoro warned that significant progress will require focused investment in skills, retooling, and technology.

“To bridge this gap, we must invest in skills development, retooling of industry, and new technology adoption. This includes formalising the informal sector through targeted incentives and capacity-building—transforming informal enterprises into formal, competitive players in the economy,” he said.

Karoro emphasised that strong institutions, respect for the rule of law, and decisive anti-corruption measures are vital to restoring investor confidence.

“Equally important is the strengthening of institutions to ensure rule of law, protection of property rights, and an effective anti-corruption drive. These are prerequisites for a thriving private sector. We also call for greater transparency and accountability in the use of public resources to bolster credibility and improve resource efficiency,” he added.

The call for decisive leadership

As the economic headwinds intensify, the private sector stands ready to play a transformative role—provided government creates the right policy environment. For many, NDS2 is not just another development blueprint but a defining moment.

The business community views it as a make-or-break opportunity to reset the economy through smart regulation, catalytic investment, and productivity-driven growth.