• Zimbabwe's manufacturing sector contributed 15.3% to GDP, surpassing mining and other key sectors
• Capacity utilisation in manufacturing has dropped to 47.7% in Q1 2025, with specific sub-sectors facing significant declines due to high costs and limited financing
• The government is implementing strategies to revive the manufacturing sector through value addition and incentives for foreign investment

Harare- Zimbabwe’s manufacturing sector has emerged as a cornerstone of the economy, now contributing 15.3% to GDP, surpassing mining (14.5%), wholesale and retail trade (11.9%), financial services (10.8%), and agriculture (9.3%), according to the Mid-Term Budget Statement by Finance Minister Mthuli Ncube.

Despite this, capacity utilisation in manufacturing declined to 52.3% in 2024 from 53.22% in 2023, dropping further to 47.7% in Q1 2025, per the Zimbabwe National Statistics Agency (Zimstat). Sub-sectors like furniture, paper, and leather saw declines of 11%, 8%, and 6.5%, respectively, due to high production costs, outdated equipment, and limited financing.

However, beverages (76%), food processing (69%), and chemicals (68%) maintained higher utilization rates. Leading companies like Delta Corporation (beverages), National Foods (food processing), Zimplow Holdings (equipment), and PPC Zimbabwe (cement) drive the sector, leveraging government policies to enhance exports and value addition.

Zimbabwe’s government has implemented policies to revive manufacturing, focusing on value addition, export promotion, and easing business operations.

The Zimbabwe Investment and Development Agency (ZIDA) Act of 2020 allows foreign investors to operate in most sectors without restrictions, promoting technologies and value-added manufacturing. Special Economic Zones (SEZs) offer incentives like a five-year tax holiday, 15% tax rates thereafter, and duty exemptions on capital equipment imports, benefiting manufacturers in designated areas.

Duty exemptions on raw materials for export goods and VAT deferments on capital equipment for manufacturing, mining, and agriculture further reduce costs. Manufacturing firms exporting 50% of output benefit from reduced corporate tax rates (20%) and import duty exemptions on capital goods.

The National Industrial Development Policy (2021–2025) emphasizes value chain development, targeting sectors like agro-processing and textiles to reduce import dependence and boost exports.

However, high taxes, including corporate income tax (24.72% effective rate) and VAT (14.5% on most goods), coupled with complex regulatory processes like over 26 licences to opne a retail shop increase operational costs. Foreign exchange controls and currency volatility, despite the introduction of the Zimbabwe Gold (ZiG) currency in April 2024, hinder profit repatriation and raw material imports, constraining production.

Bureaucracy, corruption, and inconsistent policy enforcement, as noted by investors, further deter investment, with Zimbabwe ranking 140 out of 190 in the 2020 World Bank Ease of Doing Business report.

Comparison with South Africa and Nigeria

South Africa: South Africa’s manufacturing sector, contributing about 13% to GDP, is more advanced and diversified, driven by industries like automotive, chemicals, and food processing.

Leading companies like Volkswagen SA, ArcelorMittal, and Unilever SA benefit from a robust policy framework. The Industrial Policy Action Plan (IPAP) and the Automotive Production and Development Programme (APDP) provide incentives like tax breaks, export credits, and grants for R&D and skills development.

South Africa’s SEZs, such as the Coega Industrial Development Zone, offer tax exemptions and infrastructure support, attracting FDI. Capacity utilization averages 80–85%, significantly higher than Zimbabwe’s, due to reliable electricity, modern infrastructure, and access to regional markets via the Southern African Development Community (SADC) and African Continental Free Trade Area (AfCFTA).

However, high energy costs and labour regulations pose challenges. South Africa’s tax regime is competitive, with a corporate tax rate of 28% (reduced to 27% in 2022) and VAT at 15%, but streamlined processes and digital platforms like the South African Revenue Service (SARS) eFiling system enhance compliance efficiency compared to Zimbabwe’s cumbersome tax administration.

Nigeria: Nigeria’s manufacturing sector contributes about 14% to GDP, driven by cement (Dangote Cement), food processing (Nestlé Nigeria), and consumer goods (PZ Cussons). The Nigeria Industrial Revolution Plan (NIRP) and Economic Recovery and Growth Plan (ERGP) promote industrialisation through tax holidays, pioneer status incentives (up to seven years’ tax exemption), and duty waivers on equipment for export-oriented industries.

The Export Expansion Grant (EEG) supports manufacturers exporting at least 50% of output, similar to Zimbabwe’s incentives but with broader reach.

Capacity utilization in Nigeria averages 55–60%, slightly above Zimbabwe’s, constrained by power shortages, high borrowing costs (20–30% interest rates), and insecurity. Nigeria’s corporate tax rate is 30% (20% for smaller firms), with VAT at 7.5%, lower than Zimbabwe’s, but multiple taxation and port inefficiencies deter investors.

Nigeria’s larger market (over 200 million people) and oil revenues provide scale advantages, but corruption and policy inconsistency, like Zimbabwe’s, limit progress. Both countries struggle with foreign exchange shortages, though Nigeria’s partial naira floatation offers more flexibility than Zimbabwe’s controlled ZiG.

 Strategies for Zimbabwe’s Manufacturing Revival

To revive manufacturing, Zimbabwe can adopt lessons from South Africa and Nigeria while addressing local challenges.

Policy Reforms: Simplify licensing, reduce local levies, and digitize tax processes, emulating South Africa’s SARS platform. Nigeria’s EEG model suggests expanding export incentives to cover more sub-sectors like textiles and chemicals.

Energy and Infrastructure: Increase investment in renewable energy, as South Africa does with solar and wind, to address Zimbabwe’s power shortages (evident in 2024 blackouts). Nigeria’s off-grid solar initiatives could inspire Zimbabwe to support manufacturers with alternative energy.

Financing Access: Nigeria’s Development Bank provides low-cost loans to manufacturers; Zimbabwe could expand its Women’s Microfinance Bank model to offer affordable credit to SMEs, reducing reliance on high-interest loans (15–20% rates).

Value Addition and Exports: Like Nigeria’s focus on cement and agro-processing, Zimbabwe should prioritise lithium and gold processing, leveraging its mineral wealth. South Africa’s APDP shows how targeted sector policies can drive automotive exports, a model for Zimbabwe’s equipment manufacturing.

Regional Integration: South Africa and Nigeria benefit from AfCFTA; Zimbabwe must streamline customs processes and invest in transport infrastructure (e.g., Beitbridge corridor) to boost intra-African trade, where 60% of imports are manufactured goods.

Implications for Trade Balance and Economy

Reviving manufacturing can transform Zimbabwe’s trade balance, currently strained by a 2024 deficit due to drought-induced agricultural imports and capital goods needs.

By scaling up value-added exports (e.g., processed foods, textiles), Zimbabwe can reduce its import bill, which includes 60% manufactured goods, and increase foreign exchange earnings, stabilising the ZiG. This mirrors Nigeria’s cement export success under Dangote, reducing import dependence.

A stronger manufacturing sector, integrated with mining (e.g., lithium processing), can create jobs, reducing the unemployment rate and informal sector reliance (over 64% of economy). South Africa’s job creation through automotive manufacturing (120,000 jobs) highlights the potential.

Enhanced exports to SADC and AfCFTA markets can narrow the trade deficit, increase fiscal revenue, and reduce public debt (44% of GDP in 2025), fostering macroeconomic stability. However, global commodity price volatility and El Niño risks, as seen in 2024, require adaptive policies and drought-resistant investments.

In conclusion, Zimbabwe’s manufacturing revival hinges on policy reforms, energy improvements, and financing access, drawing from South Africa’s streamlined systems and Nigeria’s export incentives.

By addressing high taxes, regulatory bottlenecks, and infrastructure gaps, Zimbabwe can boost capacity utilization, enhance trade balance, and drive sustainable economic growth, leveraging its mineral and human capital wealth.

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