HARARE – President Emmerson Mnangagwa cut short his annual leave to tackle Zimbabwe’s economic crisis, characterised by widespread business closures, including big retail stores.
According to a press statement from the Ministry of Finance, Economic Development and Investment Promotion, President Mnangagwa chaired a session on developments in the economy, which included the two Vice Presidents and all Economic Ministries.
The meeting aimed to map out a way forward for the economy.
The statement noted that Zimbabwe’s economy has been experiencing strong growth since 2021, averaging 5.5% annually. However, the economy slowed down by 2% in 2024 due to the El-Nino induced drought, which impacted agriculture production and electricity generation.
One of the major concerns is the informalisation of the economy, particularly in the retail and wholesale sectors. To address this, the government is proposing additional measures, including:
Mandatory use of point-of-sale machines by all informal traders, adoption of international best practices on tax payment, leveling the playing field between formal and informal businesses and establishment of a Domestic Interagency Enforcement Team to enforce compliance in the informal sector.
The measures aim to promote formalisation and tax compliance by the informal sector.
The government has already implemented several measures to improve formalisation, including reducing the VAT registration threshold and introducing a 5% withholding tax on non-registered Micro and Small Enterprises.
“The measures implemented so far need to be enhanced. Government, in consultation with business and industry, and the Ministry of Industry and Commerce, is therefore proposing additional measures to address the impact of the informalisation of the economy.
“Research and consultations indicate that some of the reasons formal businesses are experiencing distress include competition from the informal sector, poor management and poor corporate governance which have resulted in business failure in some instances.
“The proliferation of smuggled imports-mostly in reserved sectors-which are being sold exclusively in USD, and the high cost of doing business among others, also contribute to the formal sector challenges,” Ncube stated.
These decisions come amid a string of high-profile retail closures, including the shutdown of Spar Zimbabwe’s Queensdale Spar branch and Choppies Zimbabwe’s withdrawal from the market.
Additionally, retailers like Mahommed Mussa have been compelled to drastically scale down their operations.
Long-established companies in Zimbabwe, such as Truworths, Unilever, Deloitte, and Food World, have recently shut operations due to the economic problems facing the country.
OK Zimbabwe, one of Zimbabwe’s largest retail supermarkets, has already threatened to close down.
The Group CEO, Max Karombo, had publicly warned the government last year that the retail sector was struggling due to the proliferation of informal traders who evade taxation.
However, his comments drew fierce criticism from Treasury Permanent Secretary George Guvamatanga, who suggested that Karombo and his team should be ousted from their leadership positions at OK Zimbabwe.
Undeterred by the backlash, OK Zimbabwe stood firm, even threatening to halt operations towards the end of last year. Since then, several retail companies have been forced to close their doors.
