Business leaders bullish about new year prospects

Business Reporter

CAPTAINS of industry and commerce are optimistic about prospects in 2025 after businesses remained resilient against challenges that characterised the economy this year.

Despite the impact of the El Niño-induced drought, high interest rates, erratic power supply, high cost of funding and exchange rate volatility, certain key sectors of the economy, including beverages, still performed exceptionally well.

During that period, the Government consistently responded with measures to improve the business operating environment. This was done through legislative, institutional and policy reforms, as well as streamlining of administrative procedures.

One of the policy highlights this year was the introduction of a new currency, Zimbabwe Gold (ZiG), in April, which instantly brought about stability of the exchange rate and inflation.

Things appeared to unravel a few months down the line when inflation threatened to bolt away due to exchange rate volatility, but several fiscal and monetary interventions have restored sanity in the market.

Tight fiscal and monetary policies are at the centre of all other policy measures to engender durable stability in the economy and drive growth.

Business leaders say despite the several hurdles in the domestic economy, significant latitude remains to carve out niches and space to foster growth through further investments.

Zimbabwe National Chamber of Commerce (ZNCC) president Mr Tapiwa Karoro said a lot could be done to address the various issues at company and policy levels to improve business and economic performance.

“Productivity can be improved through upskilling initiatives tailored to Zimbabwe’s key sectors, such as mining, manufacturing and agriculture. Companies can partner with local universities and vocational institutions to develop training programmes that align with industry needs,” he said.

“A well-trained workforce enhances productivity, reduces errors and minimises waste, ultimately lowering production costs.”

Mr Karoro, however, said energy costs in Zimbabwe were elevated while supply was erratic, leading to reliance on costly imported fuel.

But he noted that companies could reduce energy costs by investing in solar energy systems, energy-efficient machinery and conservation practices.

“Companies can also explore public-private partnerships (PPPs) or collaborate with renewable energy providers to reduce costs. Policymakers can support these efforts by offering incentives for renewable energy projects and by reducing import duties on fuel,” he said.

Mr Karoro also said small and medium enterprises (SMEs), which dominate Zimbabwe’s private sector, often face high input costs due to lack of economies of scale.

To address the challenge, he said, forming consortia or cooperatives to purchase raw materials and other inputs in bulk, could bring about benefits from economies of scale.

He said the Government could support this through policies that facilitate bulk importation of key raw materials with reduced import duties for members of the consortia.

Mr Karoro further highlighted that embracing digital transformation was critical for cost efficiency, while the companies utilise digital tools for inventory management, procurement and customer engagement, which can streamline processes and reduce expenses.

“Government support for digital infrastructure, such as internet access in rural areas, could extend the benefits of digital solutions to businesses throughout the country.

“Companies should also explore collaborative innovations, such as industry clusters, where companies share resources and insights to improve efficiency,” he said.

By combining these strategies with the Government’s supportive policies, Mr Karoro stressed, Zimbabwean companies could lower production costs and enhance regional competitiveness.

“The efforts of both the private and public sectors are essential for creating a sustainable, cost-efficient economy, positioning Zimbabwe as a stronger player in the regional market,” he said.

In its recent 2024 annual State of Industry and Commerce Survey report, ZNCC said enhancing the flexibility of the exchange rate to reduce the impact of the parallel market, while stabilising the currency through well-targeted foreign exchange market interventions, remained critical.

It also said the central bank should continue to build foreign exchange reserves to cover at least six months of imports and efficiently manage the current foreign exchange reserve stock through well-targeted foreign exchange market interventions to avoid depletion.

ZNCC also commented on ongoing reforms of the Industrial Development Corporation (IDC) for it to take an active role in extending “bespoke” credit to SMEs, with particular focus on value-adding industries.

“We recommend that these loans be provided at concessionary rates to enable the upgrade and modernisation of industrial equipment and processes, thereby enhancing productivity and competitiveness.

“Furthermore, the IDC should prioritise unlocking funding through international financial institutions such as the African Development Bank (AfDB) and the African Export and Import Bank (Afreximbank),” reads the report.

Last month, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube announced several proposed interventions that will shape industry and business operations next year.

These included reduction of certain taxes and rebates on key imported equipment.

However, business leaders have urged the Government to consider reviewing other proposed measures, which they believe will erode competitiveness and drive the cost of production high. 

The Confederation of Zimbabwe Industries (CZI) expressed reservations over the reduction in the degree of export orientation from 100 percent to 80 percent for manufacturing companies under Special Economic Zones (SEZ), as it will be difficult to penetrate the export market due to high costs of production.

“The proposal is that the degree of export orientation be further reviewed down,” reads the report.

CZI is also of the view that the 25 percent tax on rental income is too high, as there are other costs to be met using the money, for example, renovations and maintenance.

This is part of several new measures aimed at bringing the untaxed informal economy and unregistered SMEs into the tax bracket to boost revenue for key Government programmes. 

The industry representative body said the Government should ensure that the tax is applied on net rental income, as opposed to gross revenue from rentals.

Economist Mr Victor Bhoroma said Zimbabwe’s economy remained resilient and competitive in some sectors in 2024, and there were several businesses in some industries that had remained attractive for investment.

“When you look at (previously) high levels of inflation and distortions (that existed) in currency, we can conclude that the economy is very resilient,” he said.

 According to CZI, ZiG month-on-month inflation is currently recovering from the exchange rate devaluation shock that resulted in inflation jumping to 37,2 percent in the month of October 2024.

However, currently, the inflation trend is subsiding significantly as ZiG month-on-month inflation in November 2024 declined to 11,7 percent from 37,2 percent that was recorded in October 2024.

Mr Bhoroma said companies had found ways to manoeuvre around some of the challenges in the economy.