Industry cautiously optimistic

LIVINGSTONE MARUFU AND CLOUDINE MATOLA

Captains of industry and several economists have expressed cautious optimism about Zimbabwe’s economic performance in 2025, citing improved agricultural prospects and a more favorable business environment as key factors.

While challenges are expected, the outlook for this year is considerably more positive than 2024, primarily driven by improved rainfall patterns, which are vital for both agriculture and electricity generation.

The government anticipates economic growth will accelerate to 6% in 2025, up from a projected 2% in 2024. This growth is expected to be largely fueled by a recovery in agricultural output and enhanced power generation, following a severe drought in 2024.

With a favorable agricultural season, food security is projected to improve, significantly reducing the need for imports. This will ease pressure on the government’s fiscal resources, resulting in greater stability in the foreign exchange market. The government will not need to compete in the parallel market to secure foreign currency for food imports, thus contributing to market stability.

Tapiwa Karoro, the president of the Zimbabwe National Chamber of Commerce (ZNCC), shared insights with Business Times, noting that the improved weather conditions could bring significant positive changes to the country’s agro-based economy. Karoro emphasized that businesses are cautiously optimistic for 2025, citing the results from the ZNCC’s State of Industry and Commerce report, presented in December 2024.

“We are hopeful that key stakeholders, especially the government, will continue to review and improve policies around the ease of doing business,” Karoro remarked. He also urged authorities to maintain monetary and fiscal policies that ensure price stability and bolster market confidence.

The ZNCC remains committed to supporting government initiatives such as the National Development Strategy (NDS1) and the Zimbabwe Industrial Reconstruction and Growth Plan, which aim to provide a conducive environment for business growth.

Despite the optimistic outlook, 2024 presented a series of challenges, including volatile exchange rates and inconsistent power supply, which had a significant impact on many businesses.

Kipson Gundani, CEO of the CEO Africa Roundtable, acknowledged the silver lining in the expected good agricultural season. He predicts that Zimbabwe could see over 5% economic growth in 2025, driven by agricultural recovery. However, Gundani also pointed to potential risks, including a sluggish global economy and the resurgence of the US dollar, which may put downward pressure on commodity prices.

“On the fiscal side, aggregate demand is likely to remain subdued due to inflationary pressures and a heavy tax burden. Government policy responses will be critical in determining the ease and cost of doing business in Zimbabwe,” Gundani explained. “We expect the construction and real estate sectors to remain robust, as these industries are seen as safe havens for capital.”

The global growth outlook for 2025 is modest, with emerging markets expected to drive economic expansion, while global growth is forecast to be around 2.5%.

Like other countries in southern Africa, Zimbabwe was hit hard by an El Niño-induced drought in 2024, which severely impacted food production and hydroelectric power generation. Additionally, lower prices for lithium and platinum put pressure on the mining sector.

The Treasury has projected that the agriculture sector will grow by 12.8% in 2025, following a 15.0% contraction in 2024. Mining growth is also expected to accelerate to 5.6% in 2025, up from 2.3% in 2024.

Economist Malone Gwadu is optimistic about a recovery, particularly in agriculture, citing above-average rainfall expectations that should improve food availability and reduce import dependence. This will, in turn, support currency stabilization efforts. Gwadu also expects the mining sector to recover, though challenges such as energy shortages remain significant barriers to maximum production capacity.

“Tourism continues to show steady growth following the COVID recovery, and general hospitality consumption in the country remains strong,” Gwadu added.

Another economist, Christopher Mugaga, predicted that Zimbabwe’s economy would experience improvement in the second half of 2025, with the first half still struggling under the effects of the El Niño-induced drought. He noted that while the rains are expected to come, the benefits for agriculture and hydroelectric power would not be immediately felt, as it would take until mid-year for water levels at Kariba to recover.

“Power challenges, inflationary pressures, and continued volatility will persist in the first half of the year. Any significant improvements are likely to materialize only in the second half of 2025,” Mugaga stated.

However, Professor Gift Mugano offered a more pessimistic outlook, suggesting that 2025 could be even more challenging than 2024, as the economic difficulties of the current crisis may carry over into the new year. He pointed to external shocks, such as the Russia-Ukraine war and regional instability, as exacerbating factors. The country also faces ongoing drought conditions, which may persist into 2025, further complicating the recovery.

Mugano also noted that the launch of the Zimbabwe Gold (ZiG) in April 2024 failed to achieve its goals, citing insufficient acceptance by the public and challenges in using it for essential services like fuel and passport purchases.

“The ZiG has struggled in 2024 and will continue to face difficulties in 2025 unless there is a significant shift in government policy,” Professor Mugano warned.

Overall, while Zimbabwe’s economic recovery in 2025 is expected to be gradual, the potential for growth remains, provided the government implements the right policies and there are improvements in agriculture and power generation. However, external and domestic challenges will continue to test the resilience of the country’s economy.