Online Reporter
Michael Tome
Business Reporter
LOCAL businesses and industry bodies have called on the Government to ensure the availability of affordable finance and continued economic stability, citing these as key measures to support the expansion, competitiveness and sustainability of indigenous enterprises.
The call comes amid concerns that high borrowing costs and limited access to long-term capital are constraining businesses’ ability to invest in production capacity, acquire modern equipment and sustain growth.
Businesses argue that the current cost of funding remains prohibitively high, with elevated interest rates significantly increasing the overall cost of capital and limiting companies’ ability to access finance for expansion and retooling.
These developments come as the Reserve Bank of Zimbabwe (RBZ) recently eased monetary policy conditions by reducing key interest rates, a move aimed at aligning financial conditions with the changing inflation environment.
The bank policy rate was reduced to 30 percent from 35 percent, reflecting a structural shift in inflation dynamics.
The interest rate on the Targeted Finance Facility (TFF) was lowered to 15 percent from 20 percent, in line with the reduction in the policy rate. Under the facility, banks’ on-lending to productive sectors remained capped at an all-inclusive interest rate of 25 percent.
Crucially, the RBZ’s policy rate and the TFF rate apply exclusively to ZiG-denominated lending.
Commercial bank loans in United States dollars (USD), the currency in which the majority of productive sector borrowing occurs, are priced separately and are not directly controlled by the RBZ’s monetary policy tools.
Lending rates vary across financial institutions, with USD-denominated short- to medium-term loans ranging between 12 percent and 18 percent per annum, with an additional facility fee of between 3 percent and 5 percent.
ZiG-denominated loans, by contrast, are priced significantly higher, typically reflecting the policy rate and carrying interest costs of 25 percent or more.
Grobbie Best Foods chief executive officer Mrs Nancy Guzha said the high cost of borrowing was making it difficult for businesses to secure affordable funding, warning that prevailing interest rates were not aligned with the cost of capital in more stable markets.
She said reducing the cost of finance would be critical in enabling local companies to invest in modern machinery, expand production capacity and enhance their competitiveness in regional and international markets.
“Interest rates are currently at 18 percent and above, with the cost of accessing finance often rising to between 22 percent and 23 percent,” she said.
“This makes borrowing extremely expensive for businesses and significantly limits their ability to invest, expand operations and improve productivity.
“Having worked in the multinational environment, I understand the true cost of United States dollar funding, which should ideally be in the range of 5 percent to 8 percent. Compared to international markets, the cost of finance locally remains very high.
“Therefore, there is a need for urgent interventions to address the cost of borrowing and create a more affordable financing environment that enables businesses to access capital, invest in growth and remain competitive.”
Mrs Guzha’s comments refer specifically to USD-denominated borrowing, which is the dominant currency for capital expenditure and retooling among larger indigenous firms.
Her reference to the “true cost” of USD funding highlights the country risk premium that Zimbabwean borrowers pay above global benchmarks.
She noted that affordable and accessible funding would also allow businesses to undertake capital-intensive projects, improve operational efficiency, adopt new technologies and increase output.
Industry players have consistently highlighted difficulty in accessing affordable capital as one of the major barriers affecting the growth of small and medium enterprises and locally owned companies.
Beyond interest rates, businesses frequently cite onerous collateral requirements, particularly the demand for title deeds and fixed assets, as an equally significant obstacle, especially for smaller indigenous firms that lack substantial balance sheets. The manufacturing sector has been pushing for measures that improve access to capital, reduce the cost of doing business and create a predictable policy environment that encourages long-term investment.
Recently, Minister of Industry and Commerce Mangaliso Ndlovu acknowledged that the challenge of accessing affordable finance remains one of the key constraints facing manufacturers, particularly those seeking to retool and scale up operations.
To address this, he said, the Government had operationalised the Industrial Development Fund (IDF), which is intended to provide support for retooling, working capital needs and industrial expansion.
He added that the authorities were also accelerating reforms aimed at improving the business environment, including reducing regulatory bottlenecks, improving service delivery and enhancing ease-of-doing-business conditions.
“On our part as Government, we are very much alive to the funding challenges facing industry and as such, we have since operationalised the Industrial Development Fund, earmarked to support retooling, working capital requirements and industrial expansion,” said Minister Ndlovu.
“While this allocation remains modest relative to the scale of need, we are committed to ensuring that it becomes fully revolving and self-sustaining over time.
“At the same time, the Government is intensifying reforms aimed at improving the operating environment, with significant progress made so far towards reducing regulatory bottlenecks, improving service delivery and enhancing the ease of doing business.”
IDF is a ZiG100 million (approximately US$3,9 million) Government facility created by the Ministry of Industry and Commerce.
It provides affordable financing to help local manufacturers expand, buy new equipment and increase production.
On the other hand, the Confederation of Zimbabwe Industries (CZI) said, while financial support remained important, economic stability was the most significant incentive the Government could provide to the productive sector.
According to the results of CZI’s 2025 Annual Manufacturing Sector Survey, economic stability resulted in stronger industrial performance, with output growing by 13 percent. This is the highest growth rate recorded in the survey since 2021.
Turnover growth was about 12 percent, broadly reflecting higher production levels, while firms created net employment of about 6 percent, with companies adding an average of five jobs each during the year.
CZI chief economist Dr Cornelius Dube said the improvement in manufacturing performance recorded in 2025 compared with 2024 was largely driven by a more stable operating environment.
“The best incentive that can be given to the manufacturing sector is stability,” he said. “That is what the 2025 Annual Manufacturing Sector Survey results showed us. The only reason why 2025 was a very good year compared to 2024 is because of stability.
“A predictable economic environment allowed businesses to plan, invest and increase production, while policy consistency was as important as financial incentives in supporting industrial growth.”
