Market concentration refers to a situation where a few large firms dominate the supply of goods or services in a domestic market. These firms often produce products that have no meaningful local substitutes. At the same time, imports that could compete with them are limited due to factors such as high tariffs or regulatory barriers.
In many cases, concentrated markets generate limited benefits for society. They are frequently associated with the abuse of market power by dominant firms. High mark-ups, which translate into elevated consumer prices, are common in such environments. Because firms face limited competition, incentives for innovation and productivity growth are often weak.
However, concentration does not always arise from anti-competitive behaviour. In some industries it is simply the result of structural realities. Certain sectors require large-scale investment to remain viable, making it difficult for multiple firms to operate simultaneously. Public utilities such as electricity, water and rail transport are classic examples. In Zimbabwe, institutions such as Zesa Holdings, the Zimbabwe National Water Authority and the National Railways of Zimbabwe operate in such environments.
Even so, policymakers often debate whether introducing private sector competition into these sectors could improve efficiency.
While competition has the potential to drive better performance, experts continue to debate whether such reforms are practical or beneficial in industries that naturally favour large-scale monopolies.
Competitive markets represent the opposite of concentrated ones. They are characterised by numerous firms competing to offer the best value in terms of price, quality and service. In attempting to attract customers, businesses in competitive markets tend to innovate and improve productivity over time.
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Firms that fail to compete effectively exit the market, while successful ones create value for shareholders, consumers, government and the wider economy. Competitive domestic markets also tend to produce firms capable of competing with imports without relying on heavy government protection.
Their efficiency often allows them to expand into export markets, earning much-needed foreign currency for the country.
In Zimbabwe, the responsibility for monitoring market concentration rests primarily with the Ministry of Industry and Commerce and the Competition and Tariff Commission. These institutions are tasked with evaluating the structure of domestic markets, identifying excessive concentration where it exists, and proposing policy responses that safeguard both economic efficiency and social welfare.
Market concentration drivers
Zimbabwe’s current market structure has deep historical roots. At Independence in 1980, domestic markets were arguably more concentrated than they are today. A relatively small number of firms served the entire population across sectors such as retail, manufacturing and services.
This situation partly reflected the legacy of colonial economic structures, which concentrated wealth and ownership in the hands of a small minority while excluding the majority of black Zimbabweans from meaningful economic participation.
Economic sanctions imposed on the Rhodesian government from the early 1960s also played a role. In response to sanctions, the state provided strong support to selected domestic firms, helping them grow into “national champions.”
While this policy enabled local production during a period of isolation, it also discouraged the emergence of new entrants and smaller competitors.
Protectionist trade policies reinforced this dynamic. High import tariffs and other barriers shielded domestic firms from foreign competition.
As a result, dominant local companies were able to maintain their positions in the market without facing strong external pressure to improve efficiency.
In the years that followed Independence, policy efforts to dismantle these concentrated market structures were often limited. Entry into certain industries remained difficult, and government support for new firms was not always sufficient to challenge entrenched players.
The land reform programme that began in 2000 triggered a new phase in the evolution of Zimbabwe’s markets. A significant number of formal sector firms collapsed during this period, leaving the economy increasingly reliant on imports for many goods and services.
While some formal sector companies survived, their market power has been partly diluted by the rapid expansion of the informal sector. Informal traders now supply a wide range of goods that once came primarily from established companies. Nevertheless, for consumers who depend on the formal sector, many industries still appear highly concentrated.
Sectors such as telecommunications, financial services, electricity and water supply remain among the most visibly concentrated in Zimbabwe today.
Another important factor contributing to concentration is the country’s regulatory environment. Starting and operating a formal business in Zimbabwe often involves navigating a complex web of licences, fees and regulatory requirements. These procedures can change frequently, creating uncertainty for investors.
Such barriers discourage potential new entrants from participating in the formal economy. They also discourage existing companies from expanding operations or opening new branches. In this way, heavy regulation can unintentionally reinforce market concentration by limiting competition. Market concentration can also be entrenched by the behaviour of firms themselves. Practices such as collusion and exclusionary agreements may restrict competition.
For example, financial institutions in Zimbabwe often charge relatively high transaction fees and service charges. Despite the opportunity to gain market share by lowering costs, many institutions maintain similar fee structures. This raises questions about whether competitive pressures within the sector are sufficiently strong.
Similarly, some supermarkets require suppliers to provide goods exclusively to their outlets or impose conditions that disadvantage rival retailers. Exclusive contracts may extend to logistics providers, marketing consultants, farmers and other service providers in the supply chain. Such arrangements can make it difficult for new supermarkets to secure reliable suppliers and compete effectively.
Domestic firms may also lobby government for policies that restrict imports or protect their industries. While some protection may be justified in order to nurture strategic sectors, excessive protection can harm consumers and the broader economy.
When industries are shielded from competition for prolonged periods, firms may lose the incentive to innovate, reduce prices or expand production. The result can be stagnant industries that generate limited employment and provide poor value to consumers.
Economic consequences
Highly-concentrated markets can create several economic challenges.
One major concern is the persistence of high prices. When a few firms dominate a market, they often have the ability to maintain high mark-ups without fear of losing customers to competitors. This can increase the overall cost structure of the economy.
Businesses that depend on expensive inputs may struggle to compete with imported goods that are produced more efficiently elsewhere. In turn, domestic firms can lose their competitiveness in export markets.
Another consequence is weak productivity growth. Competition is a powerful driver of innovation and efficiency. When firms face little competitive pressure, they may have fewer incentives to improve productivity or invest in new technologies.
Low productivity has broader implications for the economy. Productivity growth is closely linked to wage growth. If productivity stagnates, real wages — adjusted for inflation — tend to remain stagnant as well.
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Tutani is a political economy analyst. — tutanikevin@gmail.com
Zimbabwe’s limited real wage growth over many years may therefore partly reflect structural weaknesses in productivity across various sectors.
Weak investment is another outcome associated with concentrated markets. When industries lack competitive dynamism, both domestic and foreign investors may be reluctant to commit capital. This can slow economic expansion and reduce job creation.
Ultimately, these dynamics contribute to entrenched poverty and weaker socio-economic outcomes. Market concentration can also erode consumer welfare. When competition is limited, firms may provide lower quality goods and services while maintaining high prices.
Inflation may also become more persistent because competitive forces that normally drive prices downward — such as innovation, discounts and promotional activity — are weaker.
In some sectors, particularly public utilities, inefficiencies can spread throughout the economy. When monopolistic utilities charge high tariffs or operate inefficiently, their costs are passed on to businesses and households.
However, the introduction of competition into public utilities does not always guarantee positive outcomes. In some countries, partial liberalisation of utility sectors has resulted in higher tariffs rather than lower ones.
South Africa’s experience in certain sectors illustrates the complexity of balancing competition with regulation. As a result, while the disadvantages of monopoly utilities are widely recognised, the best method of reform remains a subject of ongoing debate. It is also important to recognise that concentration may sometimes arise through legitimate business success. Firms that innovate effectively or operate efficiently may gain significant market share.
Zimbabwe’s telecommunications giant Econet is often cited as an example of a company that achieved dominance largely through innovation and investment. However, regulators must always ensure that market power is not abused.
Similarly, mergers and acquisitions can increase concentration but may also generate efficiencies that benefit consumers. Competition authorities therefore review major transactions to determine whether they should be approved, modified or blocked.
Policy options, recommendations
Governments have several tools at their disposal to address excessive market concentration while still encouraging economic growth. One approach is targeted price regulation in industries where competition is limited.
For example, policymakers could require banks to exempt small accounts — such as those with balances below US$50 — from monthly service charges. Financial institutions could also be prohibited from charging customers for simple digital balance inquiries.
In telecommunications, authorities could ensure that call and data charges remain broadly aligned with regional averages to protect consumers from excessive pricing.
Another policy option involves adjusting the tax structure. Firms operating in highly-concentrated industries could be subject to slightly higher corporate tax rates. This would allow part of the economic rents generated in such markets to accrue to the public sector. Revenue collected from these industries could then be used to support new entrants, fund innovation programmes or finance other national priorities.
Reducing trade barriers gradually can also encourage competition. Lower tariffs expose domestic firms to greater international rivalry, pushing them to innovate and improve productivity. However, such reforms must be implemented carefully to avoid destabilising strategic sectors.
Deregulation is another key policy lever. Simplifying licensing procedures, reducing administrative fees and improving regulatory efficiency can encourage more firms — including small and medium enterprises — to participate in the formal economy.
In the financial sector, for example, encouraging the growth of financial technology companies could increase competition, lower transaction costs and expand access to credit. Strengthening competition law is also critical. Regulations that restrict anti-competitive practices — such as exclusive supply agreements that prevent new entrants from accessing markets — should be enforced more rigorously.
In addition, competition authorities should establish formal mechanisms to monitor whether companies that obtain merger approvals honour their commitments regarding pricing and consumer protection. At the same time, policymakers must recognise that certain industries may naturally favour a small number of large firms. In such sectors, the priority should be ensuring efficiency and accountability rather than artificially forcing competition.
For public entities and other state-owned enterprises, improving governance and operational efficiency is essential. Digital systems can enhance procurement transparency, project management and financial oversight.
Whistleblowing mechanisms that reward individuals who expose corruption may also strengthen accountability. Executive contracts in public utilities should be regularly reviewed and linked to measurable performance indicators. Without improvements in governance, simply introducing private sector competitors may not produce the expected efficiency gains.
Conclusion
Market concentration remains an important structural feature of Zimbabwe’s economy. While some concentration is inevitable — particularly in industries requiring large-scale investment — excessive dominance can undermine competition, weaken productivity growth and harm consumer welfare.
Addressing these challenges requires a balanced policy approach that promotes competition while maintaining economic stability. Through effective regulation, improved governance and a more open business environment, Zimbabwe can gradually build markets that are both competitive and resilient. Such reforms would not only benefit consumers but also strengthen the country’s long-term economic growth prospects.