Economy Uncensored with Tapiwanashe Mangwiro
Zimbabwe’s economic history is a tale of resilience, innovation and adaptation. As the formal sector has struggled under the weight of economic instability, Small and Medium Enterprises (SMEs) have become the backbone of economic activity, contributing over 60 percent to GDP and employing more than 75 percent of the workforce.
However, despite their undeniable importance, SMEs in Zimbabwe face numerous challenges, including limited access to finance, regulatory hurdles and a volatile macroeconomic environment. To unlock their full potential, Zimbabwe must adopt a multi-faceted approach that includes financial inclusion, policy reform, infrastructure investment and regional integration.
Drawing from economic theories and global success stories, we can explore how these strategies can drive sustainable economic growth.
The growth of SMEs can be analysed through the lens of Schumpeter’s Theory of Innovation, which posits that entrepreneurship is a key driver of economic development. According to Joseph Schumpeter, entrepreneurs introduce new products, processes and business models that disrupt traditional markets, creating economic dynamism.
In Zimbabwe, SMEs have demonstrated this potential by filling gaps left by failing industries and providing essential goods and services. From agribusiness to technology startups, these enterprises are engines of innovation and job creation.
Moreover, Endogenous Growth Theory, developed by economists like Paul Romer and Robert Lucas, emphasizes the role of knowledge, skills and innovation in driving economic growth. Zimbabwe’s youthful population presents a unique opportunity to cultivate a knowledge-driven SME sector that leverages technology and entrepreneurship to scale local businesses.
Despite their potential, Zimbabwean SMEs operate in a challenging environment characterised by limited access to finance, high-interest rates, collateral requirements, and an underdeveloped venture capital market that make it difficult for SMEs to secure funding.
Regulatory barriers, complex business registration processes, high tax rates, and inconsistent policies discourage formalisation and expansion.
Currency volatility, inflation and exchange rate fluctuations create an unpredictable business climate, making long-term planning difficult. Poor infrastructure, unreliable electricity, limited internet connectivity and inadequate transport systems increase the cost of doing business. Many SMEs struggle to expand beyond local markets due to logistical challenges and a lack of international trade linkages.
Rwanda has become a model for SME growth in Africa through business-friendly policies, digital transformation and access to finance. The Rwanda Development Board (RDB) provides streamlined business registration, tax incentives and funding support, making it easier for SMEs to scale. Zimbabwe can adopt a similar approach by simplifying regulatory processes and reducing bureaucratic inefficiencies.
China’s rise as a global economic powerhouse was largely driven by its SME sector, which contributes over 60 percent of its GDP and 80 percent of urban employment. Through state-backed microfinance initiatives and integration into global supply chains, China has enabled SMEs to thrive. Zimbabwe can leverage regional trade agreements like the African Continental Free Trade Area (AfCFTA) to integrate its SMEs into broader markets.
India’s adoption of digital payment systems and e-commerce platforms has allowed SMEs to scale rapidly. The introduction of UPI (Unified Payments Interface) and government initiatives like Startup India have bridged the financial gap for small businesses. Zimbabwe can encourage digital transformation by investing in fintech solutions, mobile banking and digital literacy programs for entrepreneurs.
To expand access to finance, Zimbabwe should establish government-backed microfinance institutions and venture capital funds to support SMEs, develop partnerships with international financial institutions like the African Development Bank (AfDB) to provide funding and business incubation programs, and encourage mobile banking and digital lending platforms to reach informal entrepreneurs.
Policy and regulatory reforms should focus on simplifying the business registration process and providing tax incentives for SMEs, implementing a tiered taxation system that accommodates small businesses, and ensuring policy consistency to create a stable business environment.
Infrastructure development should prioritise investment in reliable electricity, internet connectivity, and transport networks to reduce operational costs and establish industrial hubs and business incubation centers that provide shared facilities and mentorship programs for startups.
Market expansion through regional trade can be achieved by taking full advantage of the AfCFTA to expand Zimbabwean SMEs’ reach beyond local markets, supporting export-oriented SMEs with incentives and access to trade financing and strengthening value chains in key industries such as agriculture, manufacturing and technology.
Digital transformation should be promoted by encouraging the use of e-commerce platforms to enable SMEs to reach wider audiences, enhancing digital literacy programmes for entrepreneurs to maximise online business opportunities and fostering fintech innovations that simplify transactions and access to capital.
Zimbabwe’s economic future hinges on its ability to harness the power of entrepreneurship and SMEs.
By addressing key challenges and drawing lessons from global success stories, the country can create a thriving SME sector that drives economic growth, employment and innovation.
Through financial inclusion, policy reforms, infrastructure investment, regional trade integration and digital transformation, Zimbabwe can unlock the full potential of its entrepreneurial ecosystem. The time for action is now. With strategic interventions and a commitment to fostering a conducive business environment, Zimbabwe’s SMEs can become the catalyst for a more resilient and prosperous economy.
Tapiwanashe Mangwiro is a resident economist with the Business Weekly and writes this in his own capacity. @willoe_tee on twitter and Tapiwanashe Willoe Mangwiro on LinkedIn
