Twin evils: counterfeits, smuggling hindering Zim’s economic growth
Zimbabwe’s economic recovery is being hampered by the twin evils of counterfeit products and rampant smuggling, according to Government officials and industry leaders.
Permanent Secretary in the Ministry of Industry and Commerce, Dr Thomas Ushe Utete, emphasised the urgent need to address these issues, calling on both the public and private sectors to play their part.
“Those two evils are so threatening to our well-being that we need to be serious about it,” Dr Utete warned.
Speaking at the CEO of the Year Awards ceremony hosted by the CEO Africa Roundtable, Dr Ushe urged businesses to refrain from smuggling and informal activities, highlighting the negative impact on the formal economy on Government revenue.
“First, by stopping smuggling yourselves. That’s the first thing I want you to do. Please, stop smuggling,” Dr Utete pleaded.
He also stressed the importance of local production and reducing reliance on imports.
“We should manufacture. We should produce our own food. We should make our own shoes. We should buy locally,” he said.
Delta Corporation CEO Matts Valela echoed these sentiments, emphasising the detrimental effects of informality on national development.
“National development cannot happen at a scale we want when we are informalising at this level,” Valela said.
He pointed out that international and local capital is hesitant to invest in an environment plagued by informality and poor governance.
“There is no more evidence of that holding back than demonstrating that financial markets are dynamic,” Valela added.
“They respond to the marketplace, they respond to the emerging places, they always change. And so something needs to be done if we must get a stable financial market space.”
Speaking at the Capital Markets Awards ceremony where he was the guest of honour Valela called for improved asset quality, transparency, and strong governance practices among listed companies to attract investment.
“I think the quality of assets that we bring to the marketplace must improve.
“We that seek to be listed must be honest and demonstrate that regulation and governance is the most important thing in the future,” he said.
Economists also weighed in on the issue.
Dr Cornelius Dube, chief economist at the Confederation of Zimbabwe Industries, highlighted the declining profitability of businesses due to increased compliance costs and competition from informal sector players.
“Why is profitability falling while economic activity is still high?” Dube asked rhetorically.
Presenting at the 2025 post-budget breakfast meeting hosted by Business Weekly, Dube attributed this to falling profitability as a result of compliance eroding profits, high informality eroding market shares while at the same time, displacing local products by imports.
Speaking at the same meeting economist James Wadi, proposed a more strategic approach to addressing informality. He suggested incentivising informal businesses to formalise by providing access to resources, information, and social security benefits.
“Policymakers must provide greater access to resources and information, pension schemes, social insurance, or other incentives—conditioned on registration as some of the incentives,” Wadi said.
He suggested using intermediaries such as business associations, non-governmental organisations, or local community groups.
The Zimbabwean market is reportedly flooded with counterfeit and smuggled goods. The Consumer Protection Commission (CPC) recently took part in market surveillance and intelligence gathering ahead of an anticipated anti-smuggling blitz.
Responding to questions from our sister publication The Sunday Mail, CPC research and public affairs manager Mr Kudakwashe Mudereri said: “The commission took part in market surveillance and intelligence gathering ahead of an anticipated anti-smuggling blitz.
“The commission focused on the proliferation of smuggled, counterfeits and substandard products in the market. It was noted that the market is flooded with products from Zambia, South Africa and Mozambique.
“The products included soft drinks, sugar, flour, infant formula, detergents . . . The commission has also noted that there is an increase in the availability of smuggled, counterfeit and substandard electrical gadgets, gas tanks and solar panels in the market.”
However, market analyst Walter Mandeya of Trigrams Investment said while the Government’s acknowledgment of the devastating impact of counterfeits and smuggling is a positive step, the real challenge lies in effective enforcement.
He said the Zimbabwe Revenue Authority (ZIMRA) was failing to effectively monitor and intercept smuggled goods while at the same time, corruption within the customs and border control system can facilitate the entry of counterfeit and smuggled products into the market.
“Stricter penalties should be imposed on individuals and businesses involved in smuggling and counterfeiting to deter future offenses.
“Furthermore, greater cooperation between ZIMRA and other relevant agencies, such as the police and the Consumer Protection Commission, is essential to coordinate efforts and share intelligence.
“By strengthening enforcement and promoting transparency, Zimbabwe can protect its domestic industries, safeguard consumer rights, and boost its economic growth,” Mandeya said.-ebsinessweekl
High cost of compliance, informalisation eroding companies’ profits: Mthuli promises to act
High cost of compliance, informalisation eroding companies’ profits: Mthuli promises to act
Zimbabwe has the third highest mandatory compliance burden in SADC (51). South Africa has just 7 and Zambia 11.
Nelson Gahadza
Zimbabwe’s high cost of compliance is eroding companies’ profits and incentivising informalisation, hence, the Government should do more to reverse the scenario, business leaders and experts have said.
The cost of compliance for businesses is the total amount of expenses a business incurs to meet regulatory requirements.
In Zimbabwe, business experts and captains of industry contend the mandatory regulatory environment remains tough for both old and new businesses and investors, resulting in some exploring loopholes to avoid compliance.
Confederation of Zimbabwe Industries (CZI) economist Dr Cornelius Dube, in a presentation at the Business Weekly-organised 2025 Post Budget Breakfast meeting on Monday, said Zimbabwe has the third highest mandatory compliance burden in the SADC region.
“Profitability for companies has been falling while economic activity is still high. This is a result of the high cost of compliance, which is eroding profits while high informality is eroding market shares,” he said.
He noted that according to World Bank data, the total tax and compliance rate is 32 percent of profit for Zimbabwe.
Dr Dube said regulators could be the main beneficiaries of business activities, and the 2025 budget did not provide any measures towards dealing with costs of regulation besides passing the burden to the Office of President Cabinet (OPC).
He noted that for a solar farm investment, engineering estimates on regulators collections in terms of permitting and licensing fees to completion of the project development phase of 1 to 10 megawatts (MW) amounts to US$129 774, with the EMA certification fee accounting for US$73 600.
From 11 to 25MW, total permitting and licensing fees to completion require a total of US$264,256, while 25MW to 50MW requires US$524,048.
Tax expert David Masaya said the 2025 Budget did not provide any measure towards costs of regulation.
He noted that VAT collections have been going up while the profitability of companies is decreasing, highlighting the high nature of compliance costs.
“Government should provide incentives to formalise the informal sector and make them see the benefits of formalisation through streamlining the costs of compliance,” he said.
Zimbabwe’s economy is highly informalised, accounting for an estimated 60-70 percent of the economy, generating annual revenue of US$14,2 billion, according to the Reserve Bank of Zimbabwe.
CZI president Mucha Mkanganwi, speaking at the post-budget meeting, said incentivising informal players through asset protection, rights entitlements, and benefits tied to formalisation could encourage them to transition.
“The high cost of formalisation is a significant barrier. Instead of focusing on how to tax the informal sector, we should prioritise making formalisation attractive. Conditional incentives such as social insurance schemes could be an effective starting point,” he said.
This is, however, different from a Government approach of instituting several tax heads and penalties in an effort to drive formalisation.
According to Masaya, the tax expert, failure on mandatory registration of various operators, clothing merchandisers/boutiques, car dealers, and lodges and the compulsory use of POS machines triggers presumptive taxes ranging from US$20 000 to US$60 000 from a monthly average of US$1 700 to US$5 000, that is on assumed monthly profits of US$7 000 to US$20 000.
Farai Mutambanengwe, founder and chief executive officer of the SME Association of Zimbabwe, said the current tax regime discourages formalisation.
“Most SMEs are focused on survival and generating money. The moment they hear about taxes, they lose interest. Many don’t even understand the budget or its implications,” he said.
He noted that the punitive nature of the tax system criminalises informal sector players.
“It’s not that people don’t want to pay taxes, but the regime is too radical. Street vendors, for instance, cannot afford these taxes. This approach will only drive SMEs further into non-compliance,” he added.
However, Finance, Economic Development, and Investment Promotion Minister Professor Mthuli Ncube said the informal sector is only informal to the Zimbabwe Revenue Authority (Zimra) and National Social Security Authority (NSSA) but formal to other regulators and local authorities.
“What is lacking is the sharing of data between Zimra and the local authorities; should that happen, we can formalise the sector quickly,” he said.
The minister said through the 2025 Budget, he proposed a number of measures focused on SMEs aimed at bringing them into formal channels.
He promised to act on the issue of the high cost of compliance in conjunction with the OPC, indicating that there are also windows of opportunity to review certain aspects of the budget as raised by industry, business, and experts.-ebsinessweekl
