FOR decades, Zimbabwe has presented a paradox. The streets of Harare, Bulawayo and Mutare are teeming with vendors, touts and small-scale operators — yet the national exchequer remains depleted, and unemployment, particularly among the youth, remains a national crisis.
The allure of small and medium enterprises (SMEs) as the engine of African growth has become an article of faith for many policymakers. However, a closer examination of Zimbabwe’s economic structure reveals a harder truth: without massive formalisation, deliberate industrial strategy, and the revival of large-scale manufacturing, the economy cannot escape its low-growth trap.
As the National Development Strategy 2 (NDS2) explicitly prioritises “transitioning the economy from dependence on primary commodities to value addition and beneficiation”.
The informal sector trap
The informal sector in Zimbabwe is not a sign of vibrant entrepreneurship but a symptom of systemic failure. According to a 2025 study published in the International Journal of Research and Innovation in Social Science by Tshuma, Ndebele, Setoboli and Sibanda, self-employment — a proxy for survivalist entrepreneurship — has a statistically insignificant relationship with GDP per capita in Zimbabwe. Despite millions of people engaged in informal trade, the country does not get richer.
As one SME operator candidly admitted at a recent exhibition: “Volumes are low, capital is low... we would rather be employed.” This sentiment captures the crisis: most informal operators are not genuine entrepreneurs but displaced workers surviving without formal jobs.
The consequences of this informality are devastating for state capacity. When economic activity remains underground, there are no key structures that ensure the flow of funds — no tax revenue for roads, schools, or hospitals. Without formal payrolls, workers lack social security, and the state cannot invest in the infrastructure needed for growth.
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According to a 2026 research webinar on African industrialisation hosted by CHSD UNILAG, increased manufacturing value-added significantly reduces the shadow economy, while higher GDP growth strengthens formal sector activity.
Conversely, informality feeds on itself: without formal jobs, people turn to survivalist trade, which further erodes the tax base.
NDS2 on employment creation
The government has not been silent on this crisis. According to the NDS2 the strategy targets the creation of decent jobs through structural transformation, industrialisation, and the formalisation of the informal economy. The NDS2 acknowledges that informal employment remains above 80% of total employment in Zimbabwe and explicitly calls for a National Formalisation Strategy. That strategy, according to a January 2026 report by New Ziana, has now been approved by cabinet, covering the period 2026–2030 and aiming to bring informal workers into the formal tax and social security net. However, analysts warn that approval without aggressive implementation will change nothing.
Missed opportunity
Zimbabwe sits on vast mineral wealth — lithium, chrome, gold, platinum, and iron ore. Yet for decades, the country has exported these resources in raw form, losing billions in potential value and thousands of jobs. The government has recently moved to enforce local processing, banning raw lithium exports and designating eight to eleven mining sites as Special Economic Zones (SEZs).
The job creation potential of a formalised, centralised extractive sector is staggering.
Currently, mining is fragmented, with thousands of artisanal miners operating precariously. If the sector were consolidated to achieve economies of scale — moving from primary extraction to beneficiation, then to manufacturing (e.g. battery production), and finally to the services required for exports — the employment impact would multiply exponentially.
Consider the multiplier effect: a large-scale, formalised chrome or lithium plant does not just employ miners. It requires engineers, logisticians, and security. The workers need schools for their children, clinics for their families, and shops for their goods.
To export the finished product (e.g. lithium batteries), the country requires freight forwarders, customs officials, and port managers.
If these extractive sectors were centralised into industrial hubs rather than fragmented, Zimbabwe could potentially create hundreds of thousands of formal jobs.
The Young Miners Foundation recently secured 300 hectares of land for chrome washing, a model that created at least 500 direct jobs from a single processing site. This, analysts argue, needs replication at scale across all minerals. From primary extraction to beneficiation, and from the schools and hospitals needed in mining areas to the service of exports along the entire chain, formalisation could transform extractives from a curse into the country’s largest formal employer.
The Fallacy of SME-Led growth
There is a growing recognition that Africa cannot grow on SMEs alone. According to a 2026 World Economic Forum report on investing in Africa, SMEs account for 80% of the continent’s labour force, yet face a $331 billion funding gap that prevents them from scaling. In Zimbabwe, the majority of these enterprises operate in “survival mode,” lacking the capital, technology, or volume to compete internationally.
Real economic transformation — the kind that lifts nations out of poverty — has historically been achieved through industrialisation. Large industries bring high revenues, high volumes, and the fiscal resources needed to build a modern state. As the CHSD UNILAG 2026 research webinar noted, it is formalised large and medium industries, not fragmented micro-enterprises, that generate the tax base for public goods. Without big industrialisation or formalised SMEs that can scale, the economy remains trapped.
Reviving manufacturing: Competing in modern era of technology
To create employment at scale, Zimbabwe must urgently revive its manufacturing sector. The collapse of domestic industry has led to a reliance on imports for everything from toothpaste to tractors, bleeding the country of foreign currency.
To restore manufacturing, a deliberate effort is required, focusing on reducing production costs and modernising technology. A critical intervention is addressing energy costs. Zimbabwe’s high tariffs and unreliable grid supply make local production uncompetitive. Reports show that the government plans to build a local solar panel manufacturing plant. According to The Energy Industry Times of April 2026, this initiative aims to promote renewable energy for industrial parks. By investing in solar energy, Zimbabwe could lower the cost of production, making “Made in Zimbabwe” goods cheaper than imports. Solar energy directly addresses the cost of production crisis, providing predictable power for heavy machinery.
Furthermore, the NDS2’s focus on scientific innovation and infrastructural development must translate into modern automated assembly lines. Policy experts argue that the government must enforce local content laws and reduce import licences for goods that can be produced domestically. This is what other countries are doing for themselves.
Policy recommendations
First, urgent formalisation is non-negotiable. The newly-approved National Formalisation Strategy (2026–2030) is a step forward, but it requires aggressive implementation: removing formalisation bottle necks, simplified registration, tax holidays for formalising firms that have true verified results on the ground, and linking formal status to health insurance among many other initiatives. Targeted employment numbers in certain sectors with fair indiscriminative recruitment processes.
Second, industrial policy must prioritise scale over subsidy. Instead of scattering limited resources across millions of micro-enterprises, Zimbabwe should create “National Champions” in mining beneficiation and agro- processing, tracking the employment progress.
Third, manufacturing must be powered by renewables. The government should facilitate Power Purchase Agreements allowing industrial zones to buy cheap solar power.
Fourth, the extractive value chain must be locked down. Banning raw exports is not enough; Zimbabwe needs state-backed infrastructure including smelters, refineries, and metallurgy training institutes to create an industry that attracts employment.
Zimbabwe stands at a crossroads. It can continue to celebrate survivalist entrepreneurship while poverty deepens, or it can take the hard road of formalisation and industrialisation. The data is clear: informality does not drive growth; it merely masks unemployment. The NDS2 provides the vision, but execution is key. By formalising the economy, centralising extractive industries, and reviving manufacturing with modern energy solutions, Zimbabwe can create the millions of formal jobs its people desperately need. This will also create aggregate demand, create savings and grow the economy. It is time to move from survival to scale.
Dzviti (nee Mapungwana) is a development economist, women economic empowerment and business analyst. These weekly Horizon articles published in the Zimbabwe Independent are coordinated by Lovemore Kadenge, an independent consultant, managing consultant of Zawale Consultants (Private) Limited, past president of the Zimbabwe Economics Society (ZES) and past president of the Chartered Governance & Accountancy Institute in Zimbabwe (CGAIZ). Email – [email protected] or Mobile No. +263 772 382 852
