• Government is consolidating many retail licenses into one, slashing fees like the liquor license from US$1,080 to US$20 and eliminating the US$703 bakery license
• High taxes, particularly the 2% IMTT, sin tax, export retention threshold still pose a greater burden than one-time licensing fees
• Global economic pressures and export-surrender requirements threaten Zimbabwe’s retail and agricultural sectors, necessitating broader reforms

Harare- Zimbabwe’s government has embarked on a series of reforms aimed at reducing the regulatory burden on businesses, with a recent focus on consolidating the cumbersome licensing requirements for retailers. This follows earlier efforts to loosen restrictions in the agricultural sector, particularly dairy and beef.

While these reforms signal a commitment to improving the ease of doing business, the broader economic landscape marked by high taxes, bureaucratic inefficiencies, and global geopolitical pressures suggests that the impact of these changes may be limited unless accompanied by deeper structural adjustments.

Operating a retail outlet in Zimbabwe currently requires navigating a labyrinth of at least 32 licenses, many of which involve bureaucratic hurdles that inflate costs and deter investment.

Willard Zireva, CEO of OK Zimbabwe, noted in a recent interview, many of these licenses are redundant, processed in the same offices, and approved by the same authorities.

The government’s plan, announced by Finance, Economic Development, and Investment Promotion Minister Mthuli Ncube, to consolidate these into a single license is a pragmatic step toward streamlining operations.

Other specific measures include slashing the liquor license fee from US$1,080 for wholesalers to US$20 for all retailers, eliminating the US$703 bakery license fee, and capping local authority fees to address disparities, such as the exorbitant US$4,200 “environmental consultation fee” charged.

These reforms align with Zimbabwe’s historical efforts to improve its standing on the World Bank’s Ease of Doing Business (EoDB) index, which ranked economies based on their regulatory environment for starting and operating businesses. In its final report, Doing Business 2020, Zimbabwe was ranked 140th out of 190 economies with a score of 54.5 out of 100, a notable improvement from 155th in 2018. This progress was driven by reforms in construction permits, electricity access, minority investor protections, and contract enforcement.

However, the EoDB index was discontinued in September 2021 due to data irregularities and methodological issues, leaving a gap in global benchmarking. Nevertheless, the government’s latest moves suggest a continuation of this reform momentum, targeting a key pain point for retailers: compliance costs.

While licensing fees are a significant hurdle, they are one-time costs that businesses can plan for and absorb over time. In contrast, recurring taxes, such as the 2% Intermediate Money Transfer Tax (IMTT) on domestic transactions, impose a far heavier burden. The IMTT, applied to every electronic transaction, erodes profit margins and increases the cost of goods and services, directly affecting retailers and consumers alike.

These taxes are more detrimental than annual licensing fees, as they create a continuous drain on cash flow.

The sugar industry exemplifies the broader impact of tax policies. The zero-rating of sugar has cost Hippo Valley US$7 million in just 12 months, while additional taxes on sugar and fast foods have squeezed major players like Delta Corporation.

Without such punitive taxes, Delta could have potentially surpassed US$1 billion in revenue, a milestone that would signal robust growth in a struggling economy. These taxes not only stifle individual companies but also dampen consumer spending and economic activity, undermining the benefits of licensing reforms.

Zimbabwe’s reform efforts are unfolding against a backdrop of global economic and geopolitical turbulence. We urge the government to lower export-surrender requirements, which mandate that exporters surrender a portion of their foreign currency earnings to the central bank.

High surrender rates reduce the competitiveness of Zimbabwean exports, particularly in sectors like mining, and agriculture which are critical for foreign exchange earnings. This issue is especially pressing given the global economic headwinds such as “President Trump’s tax carnage,” “President Putin’s madness over Ukrainian land,” and “Israel’s obsession with Palestine,” that affect commodity prices, supply chains, and export opportunities.

The Russia-Ukraine conflict has driven up global commodity prices, including fuel and fertilizers, which are critical inputs for Zimbabwe’s agricultural and retail sectors. Similarly, U.S. trade policies under Trump administration  have already increased tariffs and tightened access to key markets, while Middle Eastern instability could further disrupt global trade routes.

In this context, reducing export-surrender requirements could incentivise exporters to scale up operations, bringing in much-needed foreign currency to stabilize Zimbabwe’s economy.

Therefore, the government’s efforts to streamline licensing are commendable and could reduce the cost of doing business, particularly for small and medium-sized retailers. Capped local authority fees and consolidated licenses will lower entry barriers, potentially fostering entrepreneurship and job creation.

However, these reforms address only one facet of a complex economic challenge. The real pain points high taxes like the IMTT, sector-specific levies, and export-surrender requirements require bolder action. Tax relief, particularly on transactions and key industries like sugar, mining could stimulate growth more effectively than licensing reforms alone.

Zimbabwe’s retail sector reforms, particularly the consolidation of licenses and reduction of fees, are a positive signal to businesses struggling under regulatory weight.

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