
Tapiwanashe Mangwiro
Zimbabwe’s economy continues to grapple with significant challenges as subdued demand across key sectors dampens recovery prospects.
According to the latest Business Tendency Survey (BTS) by the Zimbabwe National Statistics Agency (Zimstat), businesses in financial and insurance activities, transportation and storage, and accommodation and food services reported stagnant or declining demand during the third quarter of 2024.
The report, which surveyed 415 establishments across critical sectors, revealed that 31,4 percent of firms in financial and insurance activities, 26,7 percent in transportation and storage, and 21,0 percent in accommodation and food services observed no change in demand levels compared to the previous quarter.
Zimstat noted that “Excluding normal seasonal changes, demand has largely remained unchanged or declined in key sectors,” highlighting the persistent economic strain.
The stagnation in demand has also eroded business confidence.
Zimstat’s findings indicate that confidence indices decreased across all sectors during the third quarter compared to the second.
The financial and insurance activities sector saw its confidence index drop from -3,3 to -8,6, while the wholesale and retail trade sector recorded a similar downturn.
Tinashe Munemo, an economist, says the decline in business confidence is a reflection of broader structural issues in the economy.
“Zimbabwe’s business environment is characterised by high costs of finance, limited access to credit and inconsistent policy measures,” he said.
“These factors undermine the ability of businesses to expand and innovate, which is crucial for driving demand.”
This sentiment was echoed by Zimstat, which reported that over 50 percent of respondents across all surveyed sectors found access to bank credit difficult.
Businesses in the financial and insurance sector, in particular, cited the cost of finance as a major constraint to growth.
The accommodation and food services sector, a critical pillar of Zimbabwe’s tourism and hospitality industry, also reported weak demand.
Only 15,8 percent of businesses in this sector observed an increase in demand, with competition being identified as the primary limiting factor.
Meanwhile, the transportation and storage sector, vital for trade and logistics, faced comparable stagnation.
In the construction sector, which is often viewed as a barometer for broader economic activity, 57,4 percent of respondents indicated their technical capacity was below normal.
Additionally, 52,1 percent of businesses in this sector described their total order books as merely “normal,” underscoring the subdued activity.
“Construction is particularly vulnerable to input cost pressures,” said economist and policy analyst Mitchell Dube.
“The high cost of materials and limited technical capacity are stifling growth in a sector that could otherwise play a pivotal role in job creation and infrastructure development.”
Despite the challenges, businesses expressed cautious optimism about the fourth quarter of 2024.
According to Zimstat, 51,3 percent of respondents anticipated an improvement in the general business situation. However, this optimism varied significantly across sectors.
The wholesale and retail trade sector displayed the highest confidence, with 62,7 percent expecting better conditions, while transportation and storage lagged, with only 42,1 percent foreseeing improvements.
Even in sectors with higher optimism, concerns remain.
Zimstat noted that competition remains a dominant challenge for accommodation and food services, transportation and retail sectors. In contrast, high input costs continue to weigh heavily on the construction and financial sectors.
Both economists emphasised the need for targeted policy interventions to address these challenges. Munemo pointed to the importance of improving access to affordable credit.
“The Government and financial institutions must work together to lower the cost of borrowing. Without this, businesses will struggle to invest in capacity and innovation,” he said.
Dube highlighted the role of fiscal and monetary policies in stabilising input costs.
“Policymakers must focus on reducing inflationary pressures, particularly in critical sectors like construction.
“Subsidies or tax incentives for material imports could provide immediate relief,” she suggested.
Zimstat’s findings paint a sobering picture of Zimbabwe’s economic landscape but also provide a roadmap for recovery. The agency emphasised the need to address structural bottlenecks, particularly access to affordable credit and high input costs, to stimulate growth and restore confidence.
As Zimbabwe navigates its post-pandemic recovery, the government faces mounting pressure to create a conducive environment for businesses to thrive.
The BTS findings serve as a stark reminder of the work that remains to foster sustainable and inclusive economic growth.
With businesses cautiously optimistic about the coming quarter, the right policy mix could make the difference between stagnation and recovery.
However, as Munemo warns: “Without decisive action, the risk is that optimism will remain just that without the tangible growth needed to transform the economy.”