By Eugenie Muchetu
Harare (New Ziana) – Starting a business isn’t easy anywhere in the world, but this is even worse in Zimbabwe where the economic environment is characterised by many adverse factors such as run-away inflation, currency volatility, informalised economy with no set rules, low investment, limited access to finance, and high public sector debt.
“Starting a business is tough and requires commitment. I began buying three buckets of baobab fruit from Mbare Musika.
Now, we source from rural women, paying them to support their families,” says Bester Tigere, an indigenous business operator who owns Tity Nutry Pvt Ltd, a beverages and confectionary concern in Harare, the capital.
Tigere established the company, which produces drinks, sweets, coffee and other products from baobab fruit, in 2017.
The firm empowers rural women and distributes products nationwide. Tigere said she has encountered stiff challenges, operating and regulatory, in establishing and running the company.
“Starting a business in Zimbabwe requires resilience and is not for the faint-hearted,” she admits.
Innocent Tapiwa Marimo, acting chief executive officer of the Confederation of Zimbabwe Retailers (CZR) pointed out: “While many new businesses struggle due to the tough economic environment, those that adapt quickly and innovate tend to thrive. Successful businesses make significant contributions to the economy through job creation, tax revenue, and the provision of goods and services. However, the rate of success varies, and the ability to weather economic fluctuations plays a critical role in long-term sustainability.”
The Zimbabwe Investment and Development Agency (ZIDA), which promotes and facilitates both domestic and foreign investment in the country, reported in its third quarter report that despite economic challenges, 168 new licenses with a projected investment value of US$1.171 billion were issued from July 1 to September 30, a 9 percent increase from the previous quarter.
Additionally, 56 licenses were renewed with a value of US$137.29 million. Mining led with US$579.90 million in projected investment, followed by the energy sector. Agriculture and mining drive economic growth and stability, benefiting from rich natural resources such as gold and lithium.
In addition, tourism contributes significantly to economic growth, with attractions such as Victoria Falls, a UNESCO World Heritage site, being a major tourist draw-card. Zimbabwe’s strong, sought-after workforce is also a vital asset for economic development.
The World Bank notes that Zimbabwe, one of Southern Africa’s fastest-growing economies with growth rates of 6.1 percent in 2022 and 5.3 percent in 2023, is expected to see a 2 percent GDP decline in 2024 due to the negative effects of the El Niño-induced drought, lower mining prices, and macroeconomic instability.
Electricity challenges have also decreased industrial growth and disrupted irrigated winter cropping. Brian Jackson from Mushtec Steel and Fireplaces noted that the business was heavily impacted by intermittent power outages and currency volatility.
They produce tank stands, braai stands, security steel fencing, fireplaces, garage and sliding doors. They buy raw materials in US dollars but sell their products in ZiG, the local currency.
The World Bank observes that while inflationary pressures have eased since the ZiG’s introduction, the exchange rate still faces challenges, evidenced by the significant official devaluation in late September 2024.
The currency volatility hampers formal sector production and planning. Persistent fiscal pressures and drought have further strained drought-responses and tax collection.
Despite all these negatives, the current economic environment presents both opportunities and challenges for new businesses.
“While there are positive policy measures, such as import restrictions and local content promotion, overall the environment remains tough. Inflation, exchange rate volatility, and limited access to affordable finance are significant hurdles.
Moreover, the growing levels of informalisation have increased competition, as informal traders often operate without the regulatory and tax obligations that formal businesses face,” highlighted Marimo.
Hundreds of new businesses start each year, from Micro, Small and Medium Enterprises (MSMEs) to large corporations. Many operate informally, affecting accurate tracking and inclusion in national economic statistics.
According to FinScope’s 2022 Micro, Small and Medium Enterprises Survey report, Zimbabwe has 3.4 million MSMEs, with only 15 percent (510 000) registered officially. They contribute 60 percent to GDP and account for 75 percent of employment, highlighting their vital role in economic growth and transformation.
But these face numerous challenges, including access to affordable capital, high operational costs, and increased competition from both formal and informal players.
New business owners often lack business planning and management skills, and collateral for loans. High inflation and volatile conditions complicate planning.
Underdeveloped credit systems and an absence of venture capital further hinder raising capital. Often times the regulatory framework can be complex for new entrants to comply, with multiple licenses and standards to adhere to.
Consequently, CZR is currently working closely with the Government to streamline regulations, and is also actively promoting formalization to ensure new businesses have a fair opportunity to compete and grow, and contribute to tax revenue and benefit from government support programmes.
Marimo explained that obtaining retail licenses is structured, but slow due to bureaucratic delays, taking four to eight weeks.
This complexity leads some new businesses to avoid formalisation. High entry and operating costs, for example US$1 000 for a shop licence, scare and stifle MSME operators.
Many also lack sector-specific information, and skip registration, missing out on benefits associated with doing so. Despite this though, most remain resilient.
Tigere said her company had payment plans for its annual licenses, adding that it complied with the law, but struggled with the high license fees and rents. She urged the government to create rent-to-buy premises for MSMEs to reduce their financial burdens.
The entry of foreign players in sectors traditionally reserved for local people worry indigenous businesses.
While it brings competition and innovation, it pressures local companies lacking capital or technology, affecting market share and pricing. The influx of cheaper, and often inferior imported products, has also severely impacted local businesses.
“These products attract price-sensitive consumers, reducing local business revenue. Informal traders import without regulatory oversight, impacting quality and formal business viability,” noted Marimo, adding that a push was being made for stricter quality control.
The government and the private sector have introduced various initiatives, funding opportunities and training to assist new businesses.
The CZR assist distressed businesses affected by economic challenges and informal competition, provides advocacy, facilitates access to finance, and offers business management training, focusing on strategic planning, financial literacy, customer service, and digital transformation.
“These initiatives are designed to ensure both new and existing businesses thrive and contribute meaningfully to the economy.”
Despite the challenges, Zimbabwe’s economic environment offers opportunities. Resilience and innovation are key to business success, leveraging on abundant human capital and natural resources.
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