A new economy rising in Zimbabwe

Tawanda Musarurwa

IN April 2024, Harare’s iconic Meikles Hotel was rebranded to Hyatt Regency Harare The Meikles, a development that highlights the ongoing significant shift in the country’s economic landscape.

The renaming signifies broader economic changes in Zimbabwe, reflecting evolving dynamics from its colonial past.

The structure of Zimbabwe’s economy has had intrinsic ties to the colonial state, hence it continued to serve the interests of a minority. It typically had high levels of inequality and reduced economic mobility for many, which stifled economic growth.

Meikles was linked to the colonial past.

Founded in 1892 by Scottish brothers John, Stewart and Thomas Meikle, the business started operating in Masvingo (then Fort Victoria). It subsequently expanded into the diversified conglomerate it has become today, with interests in the hospitality industry, real estate, food retail, agriculture and security services. The Meikles Hotel was established in 1915, becoming a landmark in Zimbabwe.

From big to many

Meikles Limited closed Barbours Department Store in 2018 and renovated it into a mall, after the group shut its other departmental store, Greatermans, in 2014.

In the past decade, the group has pivoted to its low-end retail market brand — Meikles Mega Market.

Department stores worked well as an elitist business model, but they began to falter as the economy opened up to serve the wider populace. This trend mirrors broader shifts in Zimbabwe’s commercial real estate sector.

In 2018, diversified financial services group Old Mutual opened its Eastgate Market complex, boasting 11 823 square metres (sqm) of prime retail space, which was configured to accommodate small and medium enterprises (SMEs).

Many property owners in Harare and other cities have remodelled or partitioned large properties to serve smaller businesses, leading to the rise of malls hosting diverse retailers, from clothing stores to pharmacies and grocery shops.

The reopening of the refurbished Egodini Mall in Bulawayo earlier in February is a case in point.

The facility has the capacity to house 1 200 informal traders.

Micro, small and medium enterprises (MSMEs) play a critical role in fostering broad-based economic growth, structural economic deepening and diversification, providing employment and entrepreneurial opportunities, as well as income redistribution. The structural changes taking place on the ground are reflected in the numbers. According to the Zimbabwe National Statistics Agency (ZimStat), the informal sector accounted for 41,3 percent of total employment during the first quarter of 2024, while formally employed persons made up 30 percent of the total workforce.

Infrastructure change

The transformation of Harare’s central business district (CBD) has prompted major corporations to relocate to suburban areas such as Eastlea, Avondale and Borrowdale, driving demand for office parks and conversion of residential properties into offices.

In recent years, several office parks have emerged, including First Mutual Park, the expanding Borrowdale Office Park, Celestial Park in Borrowdale and Arundel Office Park in Arundel, which offer state-of-the-art facilities to meet the growing demand of major corporations moving out of the CBD, and new businesses.

Global real estate consultancy firm Knight Frank LLP’s Africa Report (2024-2025) highlights this trend.

“In the CBD, demand mainly stems from the SME sector, with the bulk of requirements under 100 square metres.

“Monthly rental rates in the CBD vary between US$6 and US$10 per square metre, while the average office yield hovers around 8 percent,” reads part of the report.

“Conversely, suburban offices continue to record increased demand, with occupancy rates averaging between 90 percent to 100 percent. Subsequently, suburban offices command relatively higher prime rents ranging from US$12 to US$15 per square metre.”

New industrial stock

Beyond retail and services, SMEs are making inroads into Zimbabwe’s industrial sector. These industrial-oriented SMEs can drive structural economic deepening by moving into higher value-added activities, helping the country’s economy to transition from being underpinned by primary economic activities such as agriculture and mining, leading to more sophisticated and diverse economic structures.

Zimbabwe is witnessing an expansion of industrial areas, with several warehousing projects expected to improve the country’s logistics capabilities.

“Recent examples of warehouse construction projects include the Madokero Business Park warehouses by Exodus and Company, slated for completion by 2025/2026. Additionally, new warehousing projects have emerged in areas such as Westlea, Sunway City, Msasa and Mount Hampden,” adds the Knight Frank report.

“These developments reflect the growing need for high-quality storage solutions to accommodate the rising volume of imported goods and enhance logistics capabilities across the country.”

While areas such as Graniteside, Msasa, Willowvale, New Ardbennie, Workington and Southerton still hold the bulk of the capital city’s industrial stock, other areas have seen industrial expansion in recent years. Some of the new industrial stock are the Pomona Industrial Park, Jetway Industrial Park (between Airport Road and Seke Road), Skyport Industrial Park (Airport Road), Ironstone Industrial Park (Seke Road) and the expanding Sunway City Industrial Park.

Bulawayo, which is traditionally the country’s industrial hub, last year announced plans to provide 250 industrial stands in the Umvumila Special Economic Zone. This is in addition to the brownfield industrial areas in Belmont, Westondale, Kelvin and Donnington.

In Mutare, the National Social Security Authority, in partnership with the Mutare City Council, has commenced construction of the Sakubva Industrial Hub, which is a modern industrial park designed to accommodate MSMEs.

Factoring MSMEs

The authorities recognise the significant structural transformation that has taken place, from traditional, large-scale enterprises to a more diversified and SME-driven landscape.

With the inclusive economy accounting for at least 60 percent of the country’s GDP in the last couple of decades, it was always apparent that most players were operating outside the tax system. Announcing the 2024 Mid-Term Budget and Economic Review in July, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube outlined measures to bring MSMEs into the country’s tax system.

These include streamlining the presumptive tax model and mandatory use of point-of-sale machines for all business transactions.

“The dynamic nature of the economy requires a review of the presumptive tax regime, cognisant of the significant contribution of such operators to the gross domestic product,” said Professor Ncube.

But, over and above taxation, the Government is invested in the growth and diversification of the country’s MSMEs sector.

In its latest move, it widened the list of business operations that are reserved for Zimbabweans. Proposed sectors for addition to the existing list of reserved sectors are pharmaceutical retailing, borehole drilling, brick manufacturing, haulage and logistics, shipping and forwarding, and customs clearing.

These additional reserved sectors have the potential to create linkages between SMEs and large businesses, which can also enhance the contribution of the former to the country’s economic development.

Encouraging SMEs’ involvement in a wide array of economic activities also has the potential to contribute to structural economic deepening and diversification.

And with the Government emphasising devolution as a pillar to achieve an upper middle-income economy by 2030, SMEs can stimulate economic activities in rural and underserved areas, promoting regional development and economic inclusivity.

Development economist Dr Prosper Chitambara said bolstering the economic potential of MSMEs can have a positive impact on the wider economy.

“The MSMEs sector has the greatest potential of unlocking the full potential of, not just the Zimbabwean economy, but economies in general. In countries like China, MSMEs have played a critical role in terms of their economic success stories,” he said.

A 2017 paper by the Supporting Economic Transformation Programme, titled “Supporting Economic Transformation: An approach paper”, suggests that positive structural transformation of a developing economy includes shifting resources from low to high productivity sectors.

“Most employment in the Organisation for Economic Cooperation and Development is in the manufacturing and services sectors, and the labour productivity differentials between sectors are small.

“Sub-Saharan Africa on the other hand has most employment in agriculture, which has low productivity and productivity differentials with other sectors is large,” reads part of the study.

Currently, many MSMEs in Zimbabwe are involved in the wholesale and retail trade industries. According to ZimStat’s Labour Force Survey for the first quarter of 2024, a large portion of the total workforce — 41,3 percent — is in the informal sector.

The same report also highlighted that 48 percent of informally employed people were in the wholesale and retail trade industry.

A 2011 paper by the Zimbabwe Economic Policy Analysis and Research Institute (Zepari), titled “Positioning Zimbabwe manufacturing sector as a growth driver: Lessons from Singapore and Taiwan”, says boosting SMEs in the productive sectors is key for inclusive economic development.

“The Taiwanese successful story was hinged on the manner in which the SMEs sector was harnessed into the production process. The SMEs sector’s importance in the overall economic development thrust was recognised at the early stages and efforts were made to ensure that the sector also benefits from key incentives targeting the manufacturing sector,” said Zepari.

With Zimbabwe being party to both the SADC Industrialisation Strategy and the African Continental Free Trade Area agreement, MSMEs can play a key role towards both industrialisation and boosting the country’s exports.

“The efforts we spare in creating an enabling environment for foreign direct investment should equally be spared in creating an enabling environment for domestic investors, big or small, because the emergence of a strong and competitive small and medium-sized enterprise sector will accelerate sustainable industrialisation, and spur economic growth and development,” said Foreign Affairs and International Trade Minister Ambassador Frederick Shava during the plenary session of the 7th SADC Industrialisation Week last month.