Retail sector forecast to grow by 5,10percent in 2025

ZIMBABWE’S retail sector is expected to grow by 5.10 percent in 2025, but this depends on its success in navigating some of the major economic constraints and adapting to the increasing dominance of the informal economy.

Stockbroking and equities research firm, Fincent Securities, in its latest Zimbabwe Retail Sector report, said policymakers and businesses needed to adapt to the prevailing challenges to stimulate growth and improve living standards.
Challenges include high cost of financing, tight liquidity, constrained power supply, numerous taxes and regulatory constraints, most of which the Government is working to resolve.

The Confederation of Zimbabwe Industries (CZI) earlier this year proposed a Presidential directive, compelling Government ministries, agencies, departments and regulatory bodies to cut licensing fees and charges, to reduce regulatory costs burdening businesses by 50 to 70 percent by June 2025.

In February, President Mnangagwa responded to the suggestions from business, directing that all ministries and Government departments should ensure that businesses do not suffer from prohibitive regulations as well as punitive administrative licences and fees.

In his address at the First Meeting of the 2025 Cabinet Year, the President said instead of being restrictive, fees, licences, permits and regulations should promote economic development.

It is against this background that Finance, Economic Development and Investment Promotion Minister Mthuli Ncube announced in March that the Government was undertaking a comprehensive review, to streamline the country’s tax and regulatory framework. The objective, he said, was to identify and eliminate unnecessary taxes and regulatory fees that hinder business operations.

Fincent said while businesses had to navigate several economic challenges, prospects for growth in the retail sector were promising.

“Despite challenges, the retail and wholesale trade sector has emerged as a key economic driver, contributing about 18.8 percent to gross domestic product (GDP), although informal trade is growing rapidly and affecting formal sector performance,” reads part of the report.

However, to promote business formalisation and tax compliance, the authorities will make it mandatory for all informal traders to use point-of-sale machines and discourage manufacturers from supplying goods directly to them, Minister Ncube announced in January this year. The rules will be enforced by an inter-government agency team, he said.

A week earlier, the Treasury chief had announced measures to curtail informalisation, including adding alcoholic and non-alcoholic beverages, dairy products and sugar to a list of goods that are deemed to have been smuggled, unless sellers show evidence that they paid duties.

Fincent also noted that Zimbabwe’s consumer spending outlook for 2025 remained depressed due to limited growth in disposable incomes.

It said essential categories dominate, with food, housing and transport taking precedence over discretionary spending, reflecting strained household finances.

“The high informal labour market and depressed wages continue to constrain overall consumer spending,” said the firm in the report.

Fincent said Zimbabwe’s formal retail sector had been grappling with significant challenges, which resulted in rising operational costs.

“Suppliers have been migrating to informal channels due to limited foreign currency access and worsening stock shortages in the formal sector. Rising utility, wages, and finance charges have also been burdening retailers,” reads part of the report.
It added that the informal sector has been siphoning demand from formal retailers, especially with consumers shifting to more affordable options.

However, Fincent said the repeal of Statutory Instrument (SI) 81A of 2024 was a positive development, but the success of this policy hinged on policy consistency throughout the year.

Fincent highlighted that consumer spending is closely tied to the performance of primary sectors, and the mining sector offers a glimmer of hope.

“While the broader economy faces challenges, the mining sector, particularly gold operations, offers some optimism. Gold mining employs 58 percent of the sector’s workforce and is poised for a stronger year due to elevated global prices. This could bolster liquidity among lower-income groups, providing a modest buffer against economic pressures,” reads the report.

Additionally, Fincent said remittances, which contribute approximately US$2 billion annually, remain a critical source of income for many households, supporting spending resilience at the bottom of the pyramid.-herald