ZIMBABWE is alive with potential across pivotal sectors, such as agriculture and agribusiness, mining (notably energy-transition minerals) and tourism — that can be harnessed only through robust private-sector development.
The private sector, encompassing a wide spectrum of small- and medium-sized enterprises (SMEs) and the informal economy, remains the principal engine of employment and output growth.
A dynamic private sector is indispensable for channelling investment into priority value chains, enhancing productivity and steering the economy toward its development objectives. By generating markets and opportunities, private enterprise also promotes inclusive growth, social cohesion and broad-based prosperity.
International development partners, including the African Development Bank, have always emphasised the private sector’s irreplaceable role in the country’s recovery and transformation.
Against this backdrop, the Zimbabwean private sector, represented by the Confederation of Zimbabwe Industry and the Zimbabwe National Chamber of Commerce, has called for an urgent policy reset.
At a roundtable with President Emmerson Mnangagwa, these bodies would like to argue that ministries and regulators have failed to deliver meaningful progress, underscoring the need for a more predictable and business-friendly policy framework.
The Friday Drinks podcast from August 29, 2025 portrays a multi-faceted crisis across nine dimensions:
l An onerous tax regime;
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- Bulls to charge into Zimbabwe gold stocks
- Ndiraya concerned as goals dry up
- Letters: How solar power is transforming African farms
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l Pervasive corruption;
l Persistent power outages;
l Acute water scarcity;
l Onerous and costly regulatory burdens;
l Unremitted export proceeds totalling approximately US$176 million;
l Government contractors with outstanding payments aggregating around US$1,2 billion and rising;
l Widespread illicit trade and sectoral formal/informal erosion, now estimated at roughly 76% of the economy, and
l Crowding out of private-sector access to domestic credit markets.
The panel contends that this deepening crisis spans multiple channels, imperilling growth, employment, and overall macroeconomic stability.
The contemporary discourse identifies a policy milieu that undermines business confidence through multiple channels, such as, taxation, corruption, energy and water scarcity, regulatory burdens and financial constraints.
The current three-part series translates these frictions into measurable macroeconomic effects and examines their implications for growth, fiscal sustainability, financial stability and social welfare.
The first instalment assessed the entrenched punitive tax regime, endemic corruption and energy poverty. This second instalment analyses acute water shortages, onerous and costly regulations and outstanding export proceeds.
The forthcoming final and third instalment will focus on the government’s unsettled payments to contractors (standing at roughly US$1,2 billion and rising), the proliferation of illicit goods, the informal economy, and the crowding out of private-sector access to domestic credit markets.
The overarching objective is to delineate policy recalibration pathways that restore private-sector confidence, mobilise investment, and stabilise the economy.
Water scarcity
Water scarcity elevates the marginal cost of production and increases systemic operational risk across labour-intensive manufacturing, agribusiness and processing value chains.
When reliability of water supply declines, companies face output contractions, attenuated quality and heightened variability in production processes. These constraints depress total factor productivity and can induce resource misallocation as organisations substitute towards less water-intensive operations or relocate activities, dampening potential output and eroding export competitiveness.
From a health-capital perspective, constrained water access raises incidences of waterborne and related health risks, elevating precautionary expenditures and reducing effective labour input.
Companies incur higher fixed costs related to water provisioning — dry-lining (storage and handling), water trucking and on-site treatment, all translating into higher unit costs and diminished profit margins.
The adverse productivity shock is magnified for sectors with high water intensity, notably agriculture, beverages and mining, which underpin core export revenue and foreign exchange earnings.
Disruptions in these keystone sectors cascade through upstream and downstream suppliers — in fact, the whole value chain, impairing employment, fiscal receipts and domestic demand.
The macro-economic transmission channels are clear. Reduced agricultural yields and processing capacity constrain domestic supply, limiting private-sector investment and export-led growth.
Weaker export performance strains the current account and currency stability, heightening external vulnerabilities. Elevated input costs feed into consumer prices, contributing to inflationary pressures and real income compression, with disproportionate effects on low- and middle-income households. Sovereign risk perceptions often rise if water constraints undermine debt-servicing capacity or jeopardise public investment programmes in water infrastructure.
A policy framework responsive to these dynamics should prioritise comprehensive water governance reform to maximise allocative efficiency, including transparent allocation mechanisms, incentive-compatible pricing, and rigorous metering to curb non-revenue water.
Investments in storage, conveyance and distribution infrastructure are essential to close resilience gaps and reduce unreliability premia on production costs. Expanding supply-side capacity must be complemented by demand management initiatives, including efficiency standards and metering-driven conservation.
Institutional arrangements should emphasise integrated catchment planning that aligns cross-sectoral water use from industrial, agricultural and municipal stakeholders.
This requires centralised coordination bodies with statutory authority to harmonise water rights, licensing and pricing signals. Public-private partnerships should be leveraged to mobilise private capital for rehabilitating and expanding critical infrastructure, underpinned by clear concession terms, performance guarantees and robust monitoring and auditing frameworks.
The aim is to deliver reliable water services at predictable costs, thereby restoring enterprise confidence, stabilising production costs and strengthening the domestic economy’s resilience to water shocks.
Regulatory burden
The regulatory architecture shapes the cost structure, entry conditions and innovative capacity of the private sector. Excessive and opaque rules raise fixed and quasi-fixed compliance costs, elevating the hurdle to market entry and constraining productive diversification.
When regulatory intensity exceeds the marginal benefit provided by oversight, companies faced with higher regulatory friction adjust by reallocating resources to compliance rather than value creation, inducing a misallocation of capital and labour.
The result is a contraction of formal activity and a concomitant expansion of informal arrangements, which erodes tax revenues, weakens formal-sector productivity and undermines the efficiency of public policy.
The distortionary effects of onerous regulation are especially acute for SMEs. SMEs are disproportionately burdened by licensing, reporting and monitoring requirements relative to their scale, which suppresses job creation, dampens entrepreneurship and slows the diffusion of innovation.
The cumulative impact is a slower pace of digital adoption, process improvements and productivity gains, all of which are critical to sustaining broad-based economic growth and competitiveness in tradable sectors.
Policy design should prioritise dynamic, growth-oriented regulation that reduces deadweight losses while preserving essential public interests.
First, streamline approvals through integrated, one-stop-shop platforms that consolidate multiple authorisations, shorten processing times and reduce redundant reviews.
Second, implement sunset clauses and risk-based, scalable regulatory frameworks that calibrate regulatory intensity to company size, sector risk and materiality, thereby limiting compliance overhead without compromising safeguards.
Third, institutionalise regulatory impact assessments (RIAs) for all proposed rules; RIAs should quantify anticipated costs and benefits, assess distributional impacts and publish findings to enhance transparency, legitimacy and stakeholder trust.
A managed regulatory transition toward digital governance is critical. Migrating to paperless, interoperable and auditable systems reduces information frictions, lowers administrative discretion and curtails opportunities for rent-seeking and corruption.
Digital platforms can provide real-time monitoring, standardised reporting and automated compliance checks, delivering lower transaction costs for companies and higher traceability for regulators.
To sustain credibility, governance should emphasise transparent rule-making processes, with clear metrics, external evaluation and accessible public data on regulatory performance.
In sum, reengineering the regulatory environment toward efficiency, predictability and proportionality is essential for reviving private-sector dynamism.
By diminishing the fixed costs of compliance, fostering SME growth, and enabling rapid adoption of productivity-enhancing technologies, the economy can achieve stronger employment, more robust investment and greater resilience to shocks.
Remitted export proceeds
Delays or non-payment of export proceeds create liquidity frictions at the organisational level, constraining reinvestment, payroll obligations and supplier-net payments.
This cash-flow squeeze elevates working-capital costs, undermines creditor credibility with financial institutions and amplifies default risk across supplier networks, inducing a debt overhang that can throttle downstream production and investment.
Macro-economically, protracted remittance lags distort external accounts by depressing official receipts and widening current-account deficits relative to baseline projections.
The persistence of such frictions often feed currency misalignment through deteriorated confidence in external financing, heightening exchange-rate volatility and contributing to inflationary pressures via imported price dynamics and higher domestic interest-rate premia.
Transaction-cost friction compounds these effects. Exporters facing uncertain remittance timelines often make the difficult decision of deferring capital expenditure, scale back workforce expansion and renegotiate trade terms, thereby suppressing export volumes and dampening productivity improvements in tradable sectors.
The cumulative impact weakens foreign exchange generation, constrains monetary policy manoeuvrability and constrains fiscal space due to muted tax receipts from a smaller formal export sector.
Policy responses should prioritise the following:
l Robust export-finance facilities that bridge liquidity gaps;
l Timely compensation mechanisms to reconcile export proceeds within fixed time horizons;
l Export-credit guarantees to transfer residual credit risk to solvency-backed instruments, and
l Streamlined remittance channels to reduce settlement delays and costs. Strengthening trade-dispute resolution and contract-enforcement frameworks is essential to enforce payment terms, mitigate opportunistic defaults and preserve trust in cross-border transactions.
Credible commitments to prompt and transparent disbursement of proceeds will restore market confidence, lower risk premia and unlock longer-term market access and reform.
A comprehensive regime that couples liquidity-support facilities with strong legal-institutional foundations will mitigate fragmentation in external accounts, stabilise the exchange-rate regime and support a gradual deaccumulation of foreign exchange buffers.
In a nutshell, resolving the US$176 million plus arrearage is pivotal for restoring liquidity, stabilising macro-financial conditions and enabling an institutional environment conducive to sustained export-led growth.
Conclusion
In summary, issues 1-3 intersect to shape macroeconomic stability, investment climate and social welfare. Addressing water insecurity with credible governance and investment, simplifying and rationalising regulation to unlock SME growth and resolving exporter-payment frictions to stabilise liquidity and the external accounts are essential prerequisites for private-sector-led recovery.
A policy agenda oriented toward reliable utilities, predictable rules and credible payment flows will underpin investment, expand productive employment and promote inclusive growth.
Ndoro-Mkombachoto is a former academic and banker. She has consulted widely in strategy, entrepreneurship, and private sector development for organisations in Zimbabwe, the sub-region and overseas. As a writer and entrepreneur with interests in property, hospitality and manufacturing, she continues in strategy consulting, also sharing through her podcast @HeartfeltwithGloria. — +263 772 236 341.
