Mounting costs pressures, compliance clampdown squeeze industry tight

LIVINGSTONE MARUFU AND SAMANTHA MADE 

Industry and commerce is teetering on the edge, battered by soaring operational costs, relentless taxes, and a tightening noose of regulatory red tape, it has been established.

What was once a call to “Open for Business” has morphed into a survival game—where corporate closures, downsizing, and legal battles are fast becoming the new normal. With compliance raids intensifying and profit margins vanishing, the country’s commercial backbone is straining under the weight of a system that punishes productivity.

Zimbabwe’s retail giants are caught in a perfect storm of runaway input costs, punitive fuel levies, and an unrelenting compliance clampdown that threatens their very survival.

“Compliance inspections undertaken by the Ministry have resulted in 137 prosecutions, the issuance of 245 compliance notices and the seizure of 3,427 units of different products,” said Information Minister Jenfan Muswere, highlighting the government’s zero‑tolerance approach to non-compliance.

Muswere noted that “the period under review witnessed the wholesale and retail sectors facing significant viability challenges, resulting in branch closures, destocking and reduced operations by some of the retail outlets.” Yet in the same breath, he praised the “current tight monetary policy” for “yielding results in the containment of inflationary pressures and maintaining exchange rate and price stability.”

For the country’s formal businesses, these policies feel more like a chokehold than a remedy.

A wave of elevated costs is pushing Zimbabwean businesses into financial distress, with some filing for corporate rescue and others shutting down altogether.

Industry players point to a punishing mix of taxes, statutory obligations, and compliance costs that are driving up production expenses while decimating competitiveness. The result? More informalisation, a shrinking tax base, and weakened fiscal stability.

Investment advisory firm Imara Asset Management painted a bleak picture in a recent market update:
“Added to the complexity of operating in Zimbabwe is a convoluted layer of taxes, fees, levies, etc. that have accelerated informalisation. The costs for businesses to comply with regulations have become elevated, disproportionately affecting formal corporates. Corporate rescues are becoming a familiar feature.”

Imara added: “The suggestion that ‘Zimbabwe is Open for Business’ would appear to be a moot point. If you happen to be employed or invested in the informal economy where there is no tax and little regulation, then that could well be the case. Or perhaps if you happen to be involved in a business where political connections allow you to sidestep regulations and taxes which your competitors cannot escape.”

The sentiment was echoed by CEO Africa Roundtable, where executives concluded that unless drastic reforms are made, a growing number of companies will collapse.

“Government’s intervention in the retail sector governing the formulation of pricing has put a number of retailers under severe financial stress—including foreign-owned Choppies, who chose to close down and leave the country; South Africa’s Pick n Pay, who have written their investment in TM Supermarkets down to zero; and of course, Zimbabwe’s own OK Zimbabwe, whose financial woes have been well publicised and whose Board was recently forced to bring its former managers out of retirement,” the roundtable report revealed.

With profit margins under siege, tensions are boiling over between the private sector and the Zimbabwe Revenue Authority (ZIMRA), which has come under fire for demanding tax payments in foreign currency—even where revenues were earned in local currency.

Major corporates like Delta, Innscor and National Foods have found themselves in disputes with ZIMRA, with some cases now escalated to the Constitutional Court.

“ZIMRA’s tough stance against the business community is finally resulting in pushback from management and owners. Out of desperation, they are resorting to, or at least threatening ZIMRA with legal action. This will prove costly and time-consuming for both business and especially ZIMRA, who may instead seek out-of-court settlements—unless business holds firm in the knowledge that ZIMRA is wrong in its assessment,” Imara observed.

Despite repeated promises from authorities to streamline regulation, including a Cabinet mandate from President Emmerson Mnangagwa and pledges from Finance Minister Mthuli Ncube to cut red tape by half, very little progress has been made on the ground.

“There are numerous—and growing—government regulatory bodies, which appear no longer adequately funded. We suspect they’ve realised that to survive, they need to charge higher fees or impose penalties for non-compliance. Taken together with the ZIMRA issues, these are draining management time and financial resources,” said Imara.

The regulatory landscape is so costly and fragmented that even essential services such as power generation now come at an inflated compliance price. For instance, the Environmental Management Agency (EMA) requires emissions audits for every diesel generator, while the Consumer Council of Zimbabwe imposes expiration labeling even on non-perishable goods like battery water.

“The Consumer Council insists on sell-by dates on products that don’t expire—like battery water. Failure to implement implies a fine; or spend the money to add a meaningless date to every bottle,” Imara reported.

ZESA and the Zimbabwe Energy Regulatory Authority (ZERA) have recently rolled out new charges for mandatory premises inspections, adding yet another financial burden for both households and firms.

CEO Africa Roundtable head Kipson Gundani believes the tax system is crippling economic expansion rather than supporting it.

“It is arguably true that Zimbabwe is a highly taxed country, with an estimated effective tax rate of over 40%, meaning out of every US$1 generated, USc40 flows to the government and its agencies,” said Gundani. “This seems so high and counterproductive from a low-income country like Zimbabwe, as it is a near economic impossibility to tax ourselves out of poverty.”

He urged policymakers to conduct a holistic assessment to guide smarter tax policy and streamlined regulation.

The Confederation of Zimbabwe Industries (CZI) has repeatedly warned that the current environment is stifling formal manufacturing while giving smugglers and informal traders a competitive edge.

A recent VAT policy change—which removed zero-rated status from essential products—has pushed consumers toward cheaper, informal imports from neighboring countries where such goods remain untaxed.

“This simply harms local manufacturers and makes no sense for the Zimbabwe economy as a whole,” Imara noted. “There is a difficulty and cost of establishing a solar energy plant—a growing necessity given the lack of electricity supply. The regulatory hurdle alone would cost a prospective investor US$150,000 in upfront fees for various approvals. These fees are excessive when compared to regional countries.”

CZI CEO Sekai Kuvarika said that regulatory inefficiencies are paralyzing import-dependent industries, citing examples where companies must pay for overseas inspections just to import basic inputs like toothpaste.

“To win that approval, every two years the manufacturer must fund a team from that Ministry to travel to the producers of such inputs, which includes flights, hotels and per diem expenses,” she explained. “We confirmed this requirement with an importer of toothpaste for distribution in Zimbabwe.”

She also advocated for a temporary freeze on all non-critical regulations, especially for startups and small businesses, who are currently subject to the same cost structures as large corporations.

“Currently, regulatory bodies are acting as money-making machines rather than making industry more competitive and profitable,” Kuvarika said.

Despite the rhetoric of reform, the private sector feels under siege. Regulatory bodies continue to impose new layers of cost and bureaucracy, even as businesses lay off workers, downsize operations, or shutter altogether.

Without urgent intervention and a wholesale rethinking of tax and compliance policy, Zimbabwe risks pushing its formal business sector to the brink—undermining growth, jobs, and investor confidence in the process.

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