Online Reporter
Sikhulekelani Moyo, [email protected]
ZIMBABWE’S manufacturing sector started the year on a strong footing after output volumes rose by an average of 15 percent in the first quarter, driven by stable inflation, improved power supply, improved raw material availability and reduced competition from illegal imports, the Confederation of Zimbabwe Industries (CZI) has said.
According to CZI’s Key Macroeconomic Developments and Expected Impact on Manufacturing report, about 63 percent of firms reported an increase in output volumes during the review period compared to the same period in 2025, extending the growth momentum recorded last year.
CZI noted that a stable inflation and exchange rate environment played a critical role, with month-on-month ZiG inflation recorded at 0 percent, 0,1 percent and 0,5 percent in January, February and March 2026, respectively.
Annual ZiG inflation remained in single digits and below 5 percent over the quarter.
“Thus, it is expected that stable inflation boosted confidence and thus positively contributed to manufacturing sector performance,” said CZI.
Foreign currency also remained accessible through official platforms, with no recourse to the parallel market. The parallel market premium remained below 20 percent in Q1, which went a long way in cementing confidence in the ZiG.
The manufacturing sector was also buoyed by agriculture.
National statistics show agriculture grew by six percent in the first quarter of 2026 compared to the last quarter of 2025, following good rainfall in 2025.
“This assured the manufacturing sector of the necessary throughput,” the lobby group said.
Power availability improved as well. Hwange Power Station recorded average daily generation of approximately 866MW, about 57 percent of optimal capacity, a marginal 0,1 percentage point increase from the first quarter of 2025.
Kariba averaged 303MW per day, or 29 percent of capacity, up 0,2 percentage points year-on-year.
Despite a technical fault at Hwange in mid-January, output recovered and trended upward. Independent Power Producers averaged 68MW per day, contributing 3,8 percent of national demand, a 0,2 percentage point decrease.
CZI said the low IPP contribution highlights the need for stronger policy measures to incentivise investment in power generation.
Stronger market demand from agriculture, mining and construction, improved raw material availability, operational efficiencies, strategic investments and reduced competition from illegal imports,drove industrial performance.
On the cost side, global commodity prices had mixed effects. Prices of fertilisers, soybean oil and Brent crude oil, largely imported by manufacturers, rose significantly in the first quarter of 2026 compared to Q1 2025, increasing costs.
Rubber and maize prices fell, helping to reduce input costs. CZI said the sugar industry was hit by a sharp fall in export sugar prices.
CZI said cumulative revenue collections rose to ZiG64,8 billion in the first quarter of 2026 from ZiG46,7 billion in the first quarter of 2025, a 38,7 percent year-on-year growth attributed to improved economic activity and stronger tax administration.
VAT cemented its position as the largest revenue contributor, with its share rising from 27,2 percent to 29,8 percent, driven by the increase in the standard rate from 15 percent to 15,5 percent.
Corporate income tax also rose, from 8,6 percent to 11,3 percent of total collections, suggesting improved corporate profitability and stronger business performance.
However, Pay As You Earn (PAYE)’s share declined from 21,4 percent to 18,2 percent.
CZI said: “This may indicate that firms strengthened their profitability without a commensurate adjustment to wages, or that employment levels were not as fast as the growth in profitability.”
“While the higher corporate tax contribution is a positive signal for fiscal revenues and business recovery, the decline in PAYE’s relative contribution raises concerns about the pace of formal job creation and income growth. This further underscores the need for economic growth that translates into broader employment and shared prosperity.”
CZI said the Q1 performance reflects the spillover benefits of the strong 2025 agricultural season, increased tobacco production, a more stable operating environment, and firm-level strategies to protect market share and manage costs.
