GOVERNMENT has been challenged to urgently combat revenue leakages that are crippling formal industries, amid calls for radical enforcement against customs duty evasion, particularly on finished garments.
For more than two decades, Zimbabwe has experienced an influx of imported finished products, including foodstuffs and clothing, which is blamed for weakening local industries.
Finance, Economic Development and Investment Promotion minister Mthuli Ncube last month unveiled the 2026 National Budget, projecting an economic growth of 5%.
Presenting the 2026 budget analysis at a discussion organised by the Public Policy and Research Institute of Zimbabwe (PPRIZ) in Bulawayo last week, economist and acting provincial deputy director in the Industry and Commerce ministry, Stevenson Dlamini, warned that the projected growth is at risk.
He said the growth forecast relied heavily on surging commodity prices, consumptive trade (wholesale and retail), and agriculture, which was heavily weather-dependent.
“Low manufacturing capacity utilisation (47,7% in Q1 2025) further indicates instability. Sustainable economic growth should be driven by the manufacturing sector, which creates value, rather than consumptive expenditure. The current growth model is at risk due to competitive pressure on local industries, undermining its sustainability,” Dlamini said.
He welcomed efforts to adjust customs duty, particularly for the local textile sector, which has suffered major setbacks, including a sharp decline in workforce.
“To combat revenue leakages that cripple formal industries, radical enforcement against customs duty evasion on finished garments is required,” Dlamini said.
The economist said strict use of tools such as the “cost price method” for mineral pricing was also critical.
He added that closing these leakages would ring-fence revenue for government, improve fiscal capture and allow formal domestic industries to compete fairly against untaxed imports.
Dlamini warned that the current 10% increase in mineral royalties risks encouraging black-market activity, pushing formal operations into the shadow economy to benefit from premiums.
“This leads to forfeiture of benefits from price booms in the minerals and commodities markets. Careful attention is needed to plug these leakages within the industry,” he said.
On the taxation of bank withdrawals above US$1 000, Dlamini said the measure posed economic risks by undermining the intermediation role of banks and encouraging the movement of foreign currency outside the formal banking system.
He noted that although the tax exceeds revenue targets, it taxes velocity of circulation rather than value, incentivising a shift to the shadow economy and discouraging formalisation, contrary to government policy.
Dlamini said revenue collection was coming at the expense of financial inclusion, pushing people towards a cash-based economy away from formal banking to avoid digital taxes.
He recommended strong policy outreach to support the creation of a resilient and stable macroeconomic environment.
Among the key recommendations was the prioritisation of immediate liquidity restoration by accelerating the audit and validation of ZIG45,6 billion in unvalidated domestic expenditure arrears and implementing payments.
Dlamini also proposed the introduction of a credible multi-year plan to phase out distortionary transaction taxes such as the IMTT, with a clear roadmap to replace them with policies that tax verifiable production and profits.
“This approach aims to move away from taxing opinions and address reversal of Laffer curve effects caused by high taxes,” he said.
Zimbabwe Open University senior lecturer, Tobias Guzura, questioned the relevance of the budget if allocations are not implemented effectively.
“We know that since 2019, no budget has met the required 5% allocation and even smaller budgets have not been managed effectively,” he said.
Lupane State University lecturer Jabez Moyo said from an entrepreneurial perspective, he foresaw challenges to achieving positive growth.
“How can growth be achieved when VAT and the Intermediate Money Transfer Tax are increasing?” he asked.
He said higher taxes would increase compliance pressure, discourage formalisation and push the economy further into informality, while squeezing profit margins by about 1%. He added that marginal allocations to youth-focused ministries undermined the impact of youth entrepreneurship on job creation.
Another participant called for a comprehensive accountability framework for budgeting and expenditure, urging society to instil a culture of accountability.
The participant said failure in the consumption and utilisation of funds, rather than planning, was driving business failure.
PPRIZ official and Lupane State University lecturer Wayne Malinga said economic vulnerabilities remained high due to external shocks such as climate change and commodity price volatility.
He encouraged continued public debate and consultation with economists to improve policy clarity. -newda
