Business leaders in Zimbabwe have raised alarm over the escalating cost of regulatory compliance, an over-bloated government, and a contracting private sector, which they say are stifling the countryโs economic competitiveness.
These concerns were highlighted during the National Competitiveness Commission (NCC) Inaugural Competitiveness Summit held in Bulawayo on Wednesday under the theme: Building Sustainability Towards Enhanced Productivity and Competitiveness in Zimbabwe.
The summit brought together key stakeholders, including industry leaders, economists, and government officials, to discuss the challenges facing Zimbabweโs industry.
Among the most pressing issues raised was the burden of regulatory compliance, which business leaders argue is crippling the private sector and undermining the countryโs ability to compete regionally and globally.
Chief Economist at the Confederation of Zimbabwe Industries (CZI), Cornelius Dube, painted a grim picture of Zimbabweโs industrial competitiveness.
He cited the Competitive Industrial Performance (CIP) Index, published by the United Nations Industrial Development Organisation (UNIDO), which ranks Zimbabwe 124 globally and 20 in Africa in terms of industrial competitiveness.
โWe are failing in our capacity to produce and export manufactured goods, to be in line with other countries such as Namibia, even Eswatini of all countries is better than us. Our world impact, at least itโs not our worst, but we are 115 in terms of the impact that our industry is having in the world,โ he said.
โThere are industry-specific factors that affect competitiveness, but there are also other issues, especially with respect to the enabling environment.โ
Dube also attributed this poor performance to the countryโs reliance on imported raw materials.
โAbout 52% of raw materials used in the manufacturing industry are imported,โ Dube said.
โFor example, 87% of raw materials in the pharmaceutical industry are imported. To what extent can we call these products โManufactured in Zimbabweโ if they rely so heavily on foreign inputs?โ he questioned.
Another measure of competitiveness Dube cited was how almost half of Zimbabweโs industry was lying idle.
โOur capacitisation is 53% and probably this is an improvement compared to where we are coming from. But that trend is also showing us that almost close to half of the plant capacity is lying idle. Those that specialise in production would tell you, you cannot achieve economies of scale, cannot be competitive and your pricing will be affected if half of your plant is just lying idle,โ said the economist.
Dube also highlighted the high cost of regulatory compliance, which he said is disproportionately burdensome for businesses.
According to World Bank data, Zimbabwe has 51 licenses that businesses must pay for, compared to just seven in South Africa and 11 in Zambia.
This regulatory overload, Dube argued, is a significant barrier to competitiveness and a โhugeโ drain on resources.โ
โFor manufacturing firms, almost 80% of regulatory costs exceed their capacity to pay,โ he said. โOn average, businesses devote 10 days a month pursuing regulatory compliance and they need at least three employees because you cannot have one who is a master of knowing what EMA or the National Biotechnology would want,โ Dube said.
Dube pointed out that the problem is worsening, with new regulations being introduced at an alarming rate.
โWe analysed about 42 regulations and about 24% are just 10 years or below. That means as we are speaking right now, new regulations are being thought about. Some are over 50 years old but we also have very recent regulations. Over the past 20 years, we had about 38% new regulations,โ he said.
โThereโs one SME who wanted to formalise and they actually paid US$8 515 to formalise. We are talking about somebody who was just informal. In other words, the only way we can actually incentivise formalisation is to deal with these issues.โ
In response to these challenges, Dube called for urgent intervention, including a presidential decree to temporarily reduce regulatory costs by 50%.
He argued such a measure would provide much-needed relief to businesses without crippling regulatory authorities.
โEven if most regulatorsโ charges are reduced by 50%, they are not going to go broke,โ Dube said.
โThey are just collecting fees, regardless of the performance of businesses or the state of the economy.โ
Dube also emphasised the need for a regulatory impact assessment to evaluate the cost and benefit of existing regulations.
โAll regulations should be subjected to a justification exercise. If a regulation cannot pass a cost-benefit analysis, it should be removed,โ he said.
โBecause a company wants to set up a solar farm. You take $25 000. Why are you taking $25 000?โ
Chief Executive Officer at the Zimbabwe National Chamber of Commerce (ZNCC), Christopher Mugaga, echoed Dubeโs concerns and highlighted the proliferation of Statutory Instruments (SIs) as a major challenge for businesses.
SIs are often introduced without adequate consultation and have been criticised for creating an uncertain business environment and increasing compliance costs.
โThe sad thing is these SIs have a bias towards business. I donโt know whether, together, government, we are impatient to wait for the policy to respond. Because itโs one policy, then tomorrow because there are people who are doing this, you put another SI to deal with them,โ he said.
Mugaga called for greater scrutiny of SIs to ensure they align with existing legislation and policy frameworks.
โThe hope from the private sector is that all SIs undergo thorough review by the legal portfolio committee to ensure they are not ultra vires or inconsistent with existing laws,โ he said.
Mugaga also criticised the size and role of the government, which he said is stifling market forces and hindering economic growth.
โThe government is too big, not just in terms of the number of employees but also in its role in the economy,โ he said.
โWhen you violate market forces, the consequences are predictable. We need to respect market forces if we want to solve 75% of our economic problems.โ
Chief Executive Officer of Africa Roundtable, Kipson Gundani, agreed with Mugagaโs assessment, warning of a growing mismatch between the public and private sectors.
โAs the private sector contracts, the public sector continues to grow. This creates a serious imbalance in the economy,โ Gundani said.
โThe public sector is being failed by a contracting private sector, which is struggling to generate the revenue needed to sustain government operations.โ
Gundani called for a comprehensive review of the size and structure of the government.
โThereโs nothing wrong with right-sizing the government. If the private sector is cutting its cloth to fit, the public sector should do the same,โ the CEO said.
