Treasury moves to revive industry with incentives

In his 2025 National Budget Statement, Zimbabwe’s Minister of Finance, Economic Development, and Investment Promotion, Professor Mthuli Ncube, charted a bold course aimed at industrial growth, local production and regional trade integration.

The policy measures, which span incentives for local vehicle assembly to adjustments in special economic zone (SEZ) incentives, have garnered significant praise from economists and analysts. Among the standout initiatives is the push to localise vehicle assembly by addressing duty disparities between Completely Built Units (CBUs) and Semi Knocked Down (SKD) kits.

Mthuli stated: “The motor vehicle assembly sub-sector has been identified as a quick-win value chain, mindful of the potential to transform 199 Completely Knocked Down (CKD) kits and SKDs to CBUs on the local market.”

To realise this vision, the budget proposes a two-year suspension of customs duty on SKD kits starting January 2025. According to Mthuli, this move aligns with the National Development Strategy 1 (NDS1) and is expected to foster job creation, bolster value chains and reduce the country’s reliance on finished imports.

Economic analyst, Namatai Maeresera, applauded the decision, noting: “This is a significant step towards industrial self-reliance. By prioritising local assembly, the Government is positioning Zimbabwe as a key player in regional value chains, especially under the African Continental Free Trade Area (AfCFTA).”

Economist, Dr Prosper Chitambara, added that this initiative could unlock downstream benefits for upstream industries, as it sets a 35 percent local content threshold for value-added products.

“The emphasis on local content ensures that domestic industries supplying raw materials to assemblers also benefit,” he said.

Another highlight is the decision to terminate the suspension of duty on imported public service buses from January 2025. While the initiative initially enabled the import of 827 buses, surpassing the 500-unit target, Mthuli explained the rationale behind its discontinuation.

“In view of the substantial benefits that have accrued to approved importers, and the need to redirect resources towards value addition, I propose to terminate the Suspension of Duty Facility on imported buses,” he explained.

Gladys Shumbambiri-Mutsopotsi, an economist, lauded this shift. “By channelling resources toward domestic production, the Government is enhancing industrial resilience and promoting sustainability,” she said.

However, she urged the Government to provide adequate support for emerging bus assembly plants to ensure they can meet domestic demand.

Addressing the challenges faced by the local wine industry, the budget introduces a ring-fenced duty suspension facility for 100 000 liters of raw wine per year over two years. This measure is expected to augment the supply of locally produced wine while maintaining a balance in revenue generation.

Mthuli justified the move, saying: “As a quid pro quo to the above, it is essential for the Government to generate revenue from the consumption of final products thereof. To this end, excise duty on selected alcoholic beverages will rise from $0.25 to $0.30 per litre.”

This dual approach impressed Mr Maeresera, who described it as: “A pragmatic balance between supporting industry and ensuring fiscal sustainability.”

Additionally, the review of SEZ incentives marks a departure from the overly generous framework introduced in 2017. The proposed changes include reducing the degree of export orientation from 100 percent to 80 percent, replacing the five-year tax holiday with a 15 percent corporate income tax rate, and introducing a lower withholding tax of 10 percent.

Mthuli articulated the need for these revisions.

“Pursuant to the need for creating a balance between investment, export promotion, creation of global value chains, as well as commensurate contribution by beneficiary companies to the fiscus, there is need to review the current regime in line with regional best practices,” he noted.

Dr Chitambara praised the reforms, noting that they “Strike a fine balance between attracting investment and ensuring that the Government derives tangible benefits.” He also emphasised the exclusion of petroleum and mineral extraction from SEZ status as a step toward focusing incentives on value-added manufacturing and services.

While the budget has been widely praised, minimal criticism focuses on the potential execution risks. Shumbambiri-Mutsopotsi cautioned that; “Policy consistency will be key to sustaining investor confidence.”

She also underscored the importance of infrastructure investments to support local industries, particularly in the motor vehicle assembly sector.

Maeresera highlighted the need for monitoring mechanisms to ensure compliance with local content requirements, especially under the AfCFTA framework. “Without strict enforcement, the intended benefits of local value chain development might not materialise,” he warned.

The 2025 budget positions Zimbabwe on a trajectory of industrial growth and regional competitiveness. Through recalibrating policies to support local production, incentivise value chains, and integrate into continental trade frameworks, Mthuli has laid the groundwork for sustainable economic development.

Dr Chitambara said: “This is a transformative budget that reflects the Government’s commitment to balancing fiscal responsibility with industrial revitalisation.” If implemented effectively, the measures could mark a turning point for the country’s economy in the years to come.ebsnessweekl