State contractors owed millions of United States dollars under Zimbabwe’s ambitious infrastructure drive said this week safeguards will be critical as government moves to pay exclusively in Zimbabwe Gold (ZiG).
Tinashe Manzungu, president of the Zimbabwe Builders and Construction Association, said the country’s latest policy shift represented a delicate balancing act between stabilising a market battered by volatility and managing unintended consequences of the new plan.
“This represents a high-stakes attempt to fix old problems, but it will definitely bring side effects,” Manzungu told the Zimbabwe Independent.
Battling to resolve a payment gridlock stretching back several years, Treasury last month introduced a National Standard Price List (NSPL) and directed that all payments to local suppliers and contractors be made exclusively in ZiG.
The policy lies at the centre of broader efforts to boost demand for the two-year-old gold-backed unit, in a market where confidence has been eroded by past episodes of hyperinflation.
Authorities argue recent gains have strengthened the case for the shift. Annual inflation fell to 4,1% in January, dropping into single digits for the first time in decades, while foreign currency inflows rose to US$3,4 billion in the first two months of the year, up from US$1,9 billion during the same period in 2025.
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These developments have emboldened government to push ahead with a ZiG-only payment regime. But contractors said risks are already emerging within a sector central to Zimbabwe’s infrastructure ambitions.
Local contractors played a vital role in the construction of the US$90 million Trabablas Interchange, among other projects.
Manzungu warned that paying contractors in a local currency, while most inputs are priced in US dollars could trigger defensive pricing as firms attempt to hedge against exchange rate volatility.
“Whether this is a sustainable solution depends on which side of the ledger you are looking at,” he said.
“Contractors will naturally quote higher to protect themselves against currency risk, which could itself become inflationary.”
He added that without strong contractual protections, firms may begin to avoid public tenders.
“There is need for mechanisms such as exchange rate adjustment clauses — for example, allowing a review if the rate moves beyond a 5% band,” Manzungu said.
“Shortened payment cycles would also help.”
Manzungu cautioned that without such safeguards the pool of contractors willing to take on government projects could shrink.
“When the gap between input costs and final payment becomes unpredictable, firms shift from a growth mindset to a survival mindset — and that rarely includes high-risk public tenders,” he said.
Observers said while standardisation could improve efficiency, rigid pricing frameworks may create additional strain.
“Standardisation should mean that once a price is approved, payment is processed faster. But standard contracts often fix prices at the tender stage, which becomes problematic in a volatile currency environment,” he said.
Manzungu acknowledged that a more disciplined and predictable payment framework could deliver long-term benefits if properly structured.
The new policy effectively positions the State as the anchor of ZiG adoption, leveraging its spending power to shift economic activity away from the US dollar, which makes up to 80% of transactions.
Trust Chikohora, a former president of the Zimbabwe National Chamber of Commerce and ex-Comesa Business Council member, shared Manzungu’s concerns.
“For contractors to be paid exclusively in ZiG while operating in an environment where 70% to 80% of transactions are in US dollars creates serious viability challenges,” he said.
“We could see some suppliers folding, others delaying delivery, or failing to meet contract obligations,” Chikohora added.
“It may have been better to phase this in — with part payments in ZiG and part in US dollars — to allow the market to adjust,” he said.
Chenayimoyo Mutambasere, a development economist at Africa Centre for Economic Justice, criticised the policy for lacking clarity.
“It dampens investor confidence and negatively affects the ease of doing business,” she said.
“Contractors will inevitably increase prices to cover currency risk, given that their costs are largely in US dollars while payments are in ZiG.”
She also raised concerns about confidence in the currency itself.
“The backing of the ZiG has not been clearly established. This creates perceptions of weakness and instability,” Mutambasere said.
“As a result, either prices will rise, or contractors will withdraw, leaving fewer players willing to work with the government, often at a premium.”
Economist Tapiwa Mashakada, however, defended the NSPL as necessary.
“All material quotations are expected to fall within a government-set benchmark range,” he said.
“Paying suppliers in ZiG will increase its usage across the economy.”