LOCAL consumer goods producers are increasingly abandoning export markets to concentrate on domestic sales, where they can charge higher prices and retain 100% of their United States-dollar earnings, according to a new report by Morgan & Co.
The advisory firm attributes this strategic shift to tight Zimbabwe Gold (ZiG) liquidity, local protectionist policies and what it calls a counterproductive revision of the foreign currency surrender requirement.
“A downward revision of the foreign currency component of export proceeds has inadvertently become a deterrent to consumer goods exports since implementation,” Morgan&Co stated in its latest consumer goods sector report.
The firm noted that the slight benefit of the reduced surrender threshold has been outweighed by stronger local US- dollar sales.
“This has been exacerbated by the increase in unencumbered local US-dollar sales beyond 80% across local manufacturers at the hands of tight ZiG liquidity,” the report added.
In a move to bolster the domestic currency and ensure economic stability, the Reserve Bank of Zimbabwe has reviewed the exporters’ foreign currency retention threshold from 75% to 70%. This policy change increases the mandatory surrender of export proceeds to 30%.
Morgan & Co further observed that protectionist policies in certain sectors have made it more profitable for producers to sell locally, where they can fetch higher prices and retain all their foreign currency proceeds. Other business organisations have echoed these concerns.
In its submissions for the 2026 National Budget, the Zimbabwe National Chamber of Commerce (ZNCC) urged authorities to review the foreign currency retention policy, warning that unpaid export surrender balances “make exporting less competitive and add to an unfavourable debt position”.
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When the surrender policy was first introduced, the Zimbabwe Tobacco Association (ZTA) similarly warned that it would hurt farmers operating on thin margins, as most inputs are priced in US dollars.
“The reduction in forex retention means tobacco growers will have less hard currency to meet critical expenses, placing strain on operations, livelihoods and potentially affecting future growth in the sector,” the ZTA said.
The Confederation of Zimbabwe Industries has also criticised the Reserve Bank of Zimbabwe for delays in paying the ZiG equivalent of the surrendered export proceeds, saying the lags have crippled exporters’ ability to meet operational costs and reinvest.
Zimbabwe operates a multi-currency system dominated by the US dollar.
In April 2024, authorities introduced the ZiG in an attempt to restore a sovereign currency after years of instability, but public confidence in local money remains fragile.
A persistent shortage of ZiG notes and coins has pushed many transactions into US-dollars, undermining the intended benefits of the new currency.
The government’s export surrender policy was meant to boost domestic foreign currency supply, but businesses argue it has instead weakened their competitiveness and reduced export appetite.
Beyond the surrender system, the ZNCC has criticised Zimbabwe’s broader fiscal framework, describing the country’s tax incentives and subsidies as “extensive, fragmented, and often outdated”.
“Many incentives have lost relevance or overlap with other instruments, while certain subsidies distort markets and undermine private investment,” ZNCC said.
It also flagged excessive government spending on travel and workshops, saying “a huge chunk of public funds (is) being spent on administrative needs rather than capital projects”.
In a sharp assessment, the ZNCC concluded that “uncoordinated tax expenditures erode fiscal space, crowd out private enterprise, and reduce competitiveness by rewarding inefficiency”, adding that “administrative pricing and politically-driven subsidies, while intended for relief, have created fiscal strain without improving productivity or equity.”
