Economic Outlook
The services sector plays a significant role in the growth and development of the Zimbabwe economy, contributing 60.6% of GDP followed by industry and agriculture which make up 26.9 % and 12.5% of GDP respectively. Trade in goods and services also plays an essential role in economic growth and development, contributing about 62% of GDP in 2017. For more than two decades, the country’s economic performance was constrained by several structural challenges from weak domestic demand, high informality, high public debt, fragile investor confidence, declining productive capacity due to poor business climate, and a challenging political environment.
Zimbabwe is experiencing a substantial public debt due to a fiscal policy that is high consumption biased (for example, the public-sector wage bill is estimated at 19% of GDP), restricting budgetary space for capital and social expenditure. The use of bond note pegged against the U.S dollar has created a parallel market for foreign exchange, mainly because of a shortage of foreign currency. The real exchange rate is overvalued thereby undermining external competitiveness. The export sector’s position is weak with a net international reserve estimated at the equivalent of 0.6 months of imports. Consumer price inflation in Zimbabwe slowed to 2.98% in February 2018, from 3.52% in January of the same year.
The current government has started taking measures to improve the business climate. For example, the country is currently in the process of revising its Companies Act aimed at turning around the operation conditions for firms. Zimbabwe’s Finance Act 2018 which was gazetted on 14 March 2018, contains taxation measures and essential reforms to the Indigenisation and Economic Empowerment Act that the Indigenisation and Economic Empowerment Act will not apply to a business in Zimbabwe except for
- companies or enterprises involved in the extraction of diamonds or platinum; and
- businesses reserved for Zimbabwe citizens as outlined in the Reserve Sector of the Economy.
Potential Opportunities
The business environment in Zimbabwe remains gloomy. Government accountability and corruption remain problematic. The country also needs to deal with several challenges that are affecting the business environment to include, policy instability, inadequate foreign currency regulations, inefficient government bureaucracy, difficulties in accessing finance, poor and underdeveloped infrastructure, restrictive labour regulations, and inefficient tax administration and regulations. However, with a population of 14.88 million in 2017 that is expected to grow to 15.66 million in 2019, a GDP of US$17.11 billion in 2017, which is expected to increase to about US$20.60 billion in 2019 and a GDP per capita income of US$1,150 in 2017, projected to rise to US$1,316 in 2019, Zimbabwe provides a growing market for exporters and investors.
The country’s volume of imports of goods is expected to increase from -1.16% in 2017 up to 5.83% in 2019 and the size of exports of goods is expected to grow from -4.22% in 2017 up to about 5.94% in 2019, indicating growth in trade. Zimbabwe’s high import demand, primarily due to the decline in production over the years, offers UK businesses export opportunities for goods and services, especially consumer products, production inputs and machinery
The country also provides opportunities for export diversification to neighbouring South Africa, SADC, COMESA, Africa, the UK, the EU and other markets. The country offers investment opportunities in the mining sector as it seeks to achieve full production capacity in the sector.
There is also a potential for investment activities in the construction sector as the country aims to boost construction activities. Infrastructure development also provides a massive potential for business as the government aims to rebuild and develop new infrastructure to revamp the economy.