Zimbabwe’s companies braced for fresh turbulence last week after Finance Minister Mthuli Ncube (pictured) doubled down on a tight fiscal regime already blamed for undermining industry. His 2025 mid-term budget review sparked warnings from analysts of sustained pressure on corporate earnings during a period when the bulk of policy must be directed on keeping productive sectors running.
In frank assessments of the blueprint unveiled Thursday, two of Zimbabwe’s leading equity research firms flagged deepening informalisation and mounting operational strain. Ncube offered a general narration of the economy, but maintained policies that enhance state revenues at the expense of the very companies driving the economy.
In a market buffeted by headwinds — including a ballooning public wage bill that drains nearly half of government revenues — expectations were high Ncube would inject stimulus to support weakening fundamentals, especially eroding consumer spending and inflationary shocks.
But instead, the Treasury reinforced aggressive tax policies and kept regulatory pressure high, signalling no immediate reprieve for businesses grappling with high compliance costs, rising wages, and erratic power supplies. Industries have warned these hurdles require urgent attention to help them ride out the storms. Analysts at IH Securities said the review mostly summarised the year’s performance but lacked meaningful interventions to ease private sector burdens.
“This leads us to believe that the status quo of high taxation and regulatory oversight will be maintained,” IH said.
“Informalisation will likely persist, and we will likely see sustained pressure on corporate earnings and asphyxiation on the bottom line,” the analysis noted.
While the review hinted at potential future concessions to ease business costs, analysts said these were vague and long term in nature. In the short term, fiscal consolidation remains the overriding priority, according to those who spoke to the Zimbabwe Independent.
A key concern was that revenue collections — which reached ZiG101,2 billion in the first five months — were driven more by “enhanced tax compliance” than organic economic expansion. The government has also limited VAT exemptions and introduced new levies, including a sugar tax that has been heavily criticised by operators who say it has added another layer of costs, which are already high.
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“The operating environment will remain to be desired for listed companies for the rest of the year due to high taxation, lofty regulatory costs, and erratic power supply,” IH warned.
A rebasing of Zimbabwe’s nominal GDP from US$30 billion to US$45,7 billion technically reduced the debt-to-GDP ratio to 46,5% in 2024, from over 60%. But this statistical recalibration masks enduring structural weaknesses.
A pressing issue is Zimbabwe’s high-level of informalisation — now accounting for 76,1% of all operating business establishments, according to the 2025 Economic Census — and persistently weak domestic demand.
While mining and manufacturing showed some resilience, agriculture — a major contributor to GDP — contracted by 18,1% last year. The Treasury is projecting a dramatic 21,5% rebound in 2025, hinting on better weather and increased maize output.
IH noted that assumptions such as record gold prices, a favourable La Niña pattern, and a stable ZiG are central to Treasury’s optimistic 6% growth forecast for 2025.
Zimbabwe’s public debt stood at US$21,5 billion as of March 31, 2025, with 59% owed to foreign creditors. Debt service payments hit US$176,3 million in the first half, largely toward legacy debts and token repayments to lenders like the IMF and Paris Club.
In its review, FBC Securities warned that despite cosmetic improvements from GDP rebasing, debt sustainability remains constrained by mounting arrears and blocked access to concessional funding.
“Debt sustainability... remains constrained by external arrears, which continue to block access to concessional financing,” the firm said.
Development partner support has also slumped. The Treasury received just US$148 million in the first half — well below expectations — and full-year projections have been cut by 37,5% to US$500 million.
Government spending reached ZiG98 billion in the first half — 35,5% of the full-year budget — with public wages absorbing 46,3% of total expenditure. While infrastructure was heavily funded, analysts warned that excessive spending in sectors such as transport — which consumed 116% of its annual allocation in six months — could crowd out private investment and stall recovery.
“The government’s wage bill remains structurally high,” FBC noted, pegging it at 6,8% of GDP. The rollout of the ZiG currency brought some monetary relief. Monthly inflation averaged just 0,5% between February and June 2025, and the parallel market premium narrowed to 20% from 136% in 2024 — signalling tentative gains in credibility.
Still, despite this progress, analysts say companies remain deeply cautious.
