Retail Sector Suffocated by Taxes, Currency Woes and Informal Competition

The formal retail and wholesale sector is in deep distress as the country’s economic instability continues to widen the gulf between regulated businesses and a thriving informal market, a parliamentary report has revealed.

According to findings by the Portfolio Committee on Industry and Commerce chaired by Zaka South legislator Clemence Chiduwa, retailers are grappling with a toxic combination of excessive taxes, erratic currency policy, high energy costs and an unlevel playing field dominated by unlicensed operators and smuggled goods.

The sector, which contributes nearly 18% to the national GDP, is finding it increasingly difficult to operate within formal structures.

Businesses are encumbered by a web of over 30 licenses and annual fees exceeding US$15,000 while being forced to comply with strict exchange rate regulations — unlike their informal counterparts who transact freely in US dollars.

“The compliance burden is making it harder for formal businesses to survive, let alone compete,” the Committee noted.

Key concerns include the controversial 2% IMTT tax, which discourages electronic transactions, pushes businesses toward cash-based systems, and adds to operational costs without providing tangible benefits.

The reintroduction of the Zimbabwe Gold (ZiG) currency earlier this year has only exacerbated matters.

While the informal sector readily demands USD payments, formal businesses are required to accept ZiG at the official exchange rate further limiting their ability to source stock and maintain stable pricing.

Energy shortages have also become a defining constraint with supermarkets reportedly spending thousands of dollars weekly to power operations with diesel generators.

Plans to adopt solar energy are hindered by licensing barriers and upfront costs upwards of US$130,000.

The Committee also found that smuggled and counterfeit products are flooding the market, undercutting local retailers and eroding government revenues.

Unregulated online sellers have further complicated the landscape, operating tax-free while drawing customers with cheaper prices.

In response, lawmakers have recommended sweeping reforms — from cutting redundant licenses to scrapping the IMTT and investing in national energy infrastructure.

Without decisive action, the lawmakers warn, Zimbabwe risks hollowing out its formal economy and deepening the country’s dependence on an already sprawling informal sector.