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By Dr Tapiwa Mashakada
The Maji-Marefu Institute of Economic Governance has been monitoring the business environment since the announcement of revenue measures in the 2025 National Budget. These measures were pronounced in the November 2024 Budget Statement.
Within a month of announcing the tax and anti-smuggling measures, some retail shops started to face restocking and supply challenges. They also started to close some of their branches across the country.
Notable among the affected retail shops are OK Limited, N Richards Group Spar, and to a lesser extent, Pick n Pay. Choppies had already closed.
The question that boggles the mind is: What is the cause of these sudden retail closures?
Various explanations have been given by Economists and Business Analysts. Some have blamed the ZiG currency while others are blaming the volatile exchange rate.
While these 2 macroeconomic fundamentals create a difficult business environment, in this instance we do not think they have caused the post-budget retail fever.
Our research and findings are that big retail shops were abating the smuggling of commodities, taking advantage of our porous border posts and a lax customs duty system.
Retail shops used to get their supplies from “runners”, or commodity brokers who imported the goods illegally via smuggling. The dealers avoided customs duty by smuggling goods into Zimbabwe for onward distribution to retail shops.
The 2025 National Budget plugged the tax loopholes and introduced anti-smuggling measures. The commodity dealers were nabbed and they could no longer deliver smuggled goods to the retail market.
On 31 January 2025, the Minister of Finance announced “measures to address the informalization of the economy” as if the closures of formal retail businesses were being caused by the informal sector.
Far from it. The informalization has nothing to do with it. The measures to stop the smuggling of goods have affected the formal retail shops that were used for the illicit trade in commodities.
Yet the retail shops have an option to buy locally manufactured products and boost the production of local commodities, thereby creating jobs. Instead, they were relying on illegal imports.
The Ministry of Finance plugged the loopholes and now retailers are crying foul.
It is the duty of all citizens, companies, and tax operators to pay tax without any exception. Whether the levels and types of these taxes are desirable or not, is a debate for another day.
For now, we must applaud the anti-smuggling measures and urge businesses to buy locally manufactured products.
The retail shop closures only show the extent to which businesses cannot operate without resorting to unscrupulous means of trading. All this confirms the level of corruption, illicit trade, and shady deals that are taking place in the Zimbabwean economy.
The economy belongs to us as Zimbabweans. The government must create an enabling business environment to remove the temptation of smuggling and illicit trade.
These measures must include but are not limited to addressing the weak currency/exchange rate volatility and the high and regressive taxation rates. The government must introduce measures to stimulate domestic production.
Zikomo
Dr Tapiwa Mashakada is the Executive Director of the Manji Marefu Institute of Economic Governance
