Online Reporter
Farai Ian Muvuti
WHEN the Ministry of Women Affairs, Community, Small and Medium Enterprises Development convened the country’s first National Micro, Small and Medium Enterprises (MSMEs) and Cooperatives Indaba in Harare recently, launching a reviewed National Co-operatives Act alongside a new development policy, it was easy to read the occasion as one more ceremonial fixture on the Government’s calendar.
It should not be read that way.
Minister Monica Mutsvangwa and her team deserve genuine credit for placing small enterprise at the centre of the national economic strategy rather than treating it, as governments across the region have too often done, as a residual category to be tolerated until something bigger comes along.
The harder and more interesting question, and the one this article sets out to address, is whether Zimbabwe is beginning to build the kind of economic architecture that has powered the more durable emerging market growth stories of the past three decades, one built not on a handful of large corporates or State enterprises but on a dense, formalised, financeable base of small businesses, artisanal producers and innovation-led firms.
The case for taking small and medium enterprises (SMEs) seriously as engines of growth rather than as a welfare category is no longer contestable. The International Finance Corporation (IFC) estimates that formal SMEs contribute up to a third of gross domestic product (GDP) and close to half of employment in developing economies, figures that rise substantially once informal enterprises are counted.
In high-income economies, SMEs contribute closer to two-thirds of both output and jobs, a gap that itself maps the distance an economy like Zimbabwe’s still has to travel.
Across Africa specifically, research collected in Professor Gift Mugano’s 2024 volume on SMEs and economic development notes that the sector’s average global GDP contribution sits at around 60 percent.
This figure is consistent with the Organisation for Economic Cooperation and Development (OECD)’s own benchmarking, and the econometric work by Thorsten Beck and colleagues has established a robust, causally suggestive relationship between the relative size of an economy’s SME sector and its subsequent growth performance. (Mugano, 2024; OECD, 2017)
None of this is unique to Zimbabwe.
Kenya’s Growth Enterprise Market Segment (GEMS) and its broader SME finance architecture, Rwanda’s deliberate cultivation of an entrepreneurial ecosystem, Nigeria’s vast and chaotic but undeniably dynamic informal manufacturing base, and Ghana’s cooperative and microfinance networks all point to the same underlying truth — that African growth over the past decade has been disproportionately carried by SMEs, even where policy has not always kept pace with that reality.
It is worth being precise about why this matters beyond the accounting.
New model
The old developmental model, still visible in parts of Southern Africa, rested on large corporates, State-owned enterprises and commodity exports as the primary engines of growth. That model concentrates risk, employment and political leverage in a small number of firms and, critically, in a small number of decision-makers.
The newer model, and the one increasingly favoured by development economists and multilateral institutions alike, treats distributed economic activity, decentralised manufacturing and entrepreneurial density as sources of resilience rather than fragmentation.
Economies with a thick layer of SMEs absorb shocks more evenly, generate more broadly shared employment, particularly for the youth and women who are structurally underrepresented in large corporate employment across the region, and diversify exports away from the single-commodity dependence that has defined so much of Southern Africa’s post-independence economic history.
This is not an argument against large enterprise or against mining and agriculture as pillars of the Zimbabwean economy.
It is an argument that those pillars alone cannot carry an economy of Zimbabwe’s size and demographic profile, and that the missing middle, the small manufacturers, agro processors and service firms that should sit between subsistence activity and corporate scale, has to be built deliberately.
This is where Zimbabwe’s recent capital markets innovation deserves closer attention than it has so far received.
The Zimbabwe Stock Exchange has partnered with the National Venture Capital Company of Zimbabwe to establish the Zimbabwe Entrepreneurship Exchange — also known as ZEEX — a junior board intended to give SMEs a route to public equity capital that conventional bank lending has historically denied them.
Confirming the launch, Mr Tino Kambasha, chief executive officer of the National Venture Capital Company of Zimbabwe, described ZEEX as a platform that lets small businesses raise equity under relaxed listing rules, reducing their reliance on costly short-term debt and drawing more of the informal economy into the formal fold.
That framing goes to the heart of why this initiative matters, since it targets the financing structure itself, equity rather than short-dated, high-cost borrowing, rather than simply adding another lending window to an already debt-heavy SME finance landscape.
Not a new practice
The concept is not new, and that is precisely the point. London’s Alternative Investment Market (AIM) has spent three decades demonstrating that lighter listing requirements can bring genuinely small companies to public markets, while Kenya’s GEMS, launched in 2013 by the Nairobi Securities Exchange with deliberately relaxed requirements, including no obligation to demonstrate prior profitability, offers a closer and more sobering comparator.
GEMS attracted only a handful of listings in its first several years, a shortfall that subsequent reviews attributed less to the listing requirements themselves than to weak advisory infrastructure, thin demand from institutional investors and limited public understanding of what listing could offer smaller firms.
South Africa’s AltX has fared somewhat better by comparison, benefitting from a deeper pool of nominated advisers and institutional capital willing to underwrite smaller mandates.
The lesson for Harare is straightforward and worth stating plainly.
A junior exchange is necessary but not sufficient. ZEEX’s success will depend on whether Zimbabwe simultaneously builds the ecosystem of sponsoring brokers, accountants and institutional anchor investors, including pension funds, that Kenya’s own postmortem identified as the binding constraint rather than the regulatory architecture.
A parallel story is unfolding in venture capital.
Zimbabwe’s National Venture Capital Fund was established in 2021 with the explicit aim of channelling capital to start-ups and SMEs, and Treasury has since restructured the vehicle into the National Venture Capital Company of Zimbabwe, allocating just over ZiG165 million to it for 2026 alongside tax exemptions for firms providing venture capital finance locally.
This is a genuinely promising instrument, and one that international experience suggests can work when it is adequately capitalised and insulated from fiscal pressure.
Rwanda’s comparable vehicle, the government-backed Rwanda Innovation Fund, launched in 2018 with African Development Bank support, has since crowded in additional private capital, including the Timbuktoo Africa Fund, helping Rwandan start-ups raise tens of millions of dollars annually within a handful of years, a trajectory built as much on Kigali’s ease of doing business and a six-hour company registration process as on the fund itself.
Israel’s experience with its pioneering Yozma programme in the 1990s, which used modest public capital to leverage far larger private venture investment before the government exited its positions entirely, remains the global reference case for how a small, capital-constrained state can seed a venture ecosystem without permanently subsidising it.
Zimbabwe’s own venture capital history has been more halting.
The media reported in 2024 that nearly three years after its establishment, the original National Venture Capital Fund had yet to receive meaningful Treasury disbursement due to constrained fiscal space, with officials instead courting high-net-worth individuals to help operationalise it. The 2026 allocation and the shift to a company structure suggest the Government has absorbed that lesson.
Whether the fund can now achieve the scale and consistency of disbursement that Rwanda and Israel demonstrate is necessary and will be the real test of this instrument, not its existence on paper. Artisanal and small-scale mining presents a related but distinct financing challenge, one of Minister Mutsvangwa’s remarks at the indaba implicitly acknowledged in crediting small-scale miners with a growing share of national gold output.
Collateral
The central obstacle across the region is not a shortage of capital in aggregate but the mismatch between the itinerant, cash-intensive nature of artisanal mining and the collateral and documentation requirements of conventional bank lending.
Ghana’s experience, documented in a World Bank-supported formalisation programme, has combined royalty and assay data from its Precious Minerals Marketing Corporation with beneficial ownership disclosure to build the kind of verifiable production trail that lenders can underwrite against, while its MASLOC microcredit programme links repayment directly to production verified at local buying centres, effectively creating a royalty-backed lending structure without requiring miners to pledge conventional collateral.
Tanzania’s Women Miners Association has taken a cooperative route, partnering with microfinance providers to help members secure gemstone licences and invest in shared processing equipment.
Peru’s more mature formalisation framework illustrates a further point worth Zimbabwe’s attention, that formalisation itself is not a single event but a ladder, and that projects of miners who complete initial registration frequently stall without continued access to finance, equipment leasing and market linkages that make formal status worth the compliance cost.
Zimbabwe’s own cooperative reform, if it is to reach small-scale miners as intended, will need equivalent verifiable production data, plausibly built on existing gold output reporting, joined to blended finance structures that let development finance institutions absorb the early risk that commercial banks remain unwilling to price.
Small manufacturers and agro processors require a different but overlapping toolkit.
The most consistently successful mechanisms internationally, credit guarantee schemes that let development banks absorb first loss risk on commercial lending, invoice discounting and purchase order finance that unlock working capital tied up in confirmed sales, and manufacturing clusters that let small producers share infrastructure and bargaining power, all address the same underlying problem as the mining sector — that small firms are individually too risky and too costly to underwrite but collectively bankable. Germany’s Mittelstand remains the most studied example of what sustained investment in this middle tier can achieve.
German SMEs contribute a little over half of GDP and employ more than 70 percent of the national workforce, according to analysis published by the Inter American Development Bank. Their competitiveness rests substantially on an apprenticeship system in which SMEs train the overwhelming majority of the country’s vocational trainees, embedding skills development directly inside the firms that need them rather than leaving it to a separate state system.
Singapore and South Korea both built comparable manufacturing depth through a more directive combination of export financing, targeted credit allocation and sustained public investment in technical education, a model that required considerably more state capacity than Zimbabwe currently commands but whose underlying logic — that finance and skills must be delivered together rather than sequentially — remains transferable.
None of this should be read as uncritical enthusiasm. Zimbabwe’s own Economic Census data compiled by the Zimbabwe National Statistics Agency put the scale of the challenge in stark terms, with more than three-quarters of the country’s business establishments still classified as informal and only 51 companies listed across its two stock exchanges combined.
Informality of this scale is not simply a statistical inconvenience.
It constrains tax revenue at a moment when the State needs a broader base to fund the very institutions, from business and cooperative development officers to a functioning junior exchange, that this reform agenda depends on.
It leaves the majority of entrepreneurs outside any financial reporting discipline, which in turn makes them structurally unbankable regardless of how favourable a new law’s intentions might be. It also concentrates the productivity gains that formalisation typically brings — in access to larger contracts, in eligibility for export markets, in insurable risk — among a small formal minority while leaving the median Zimbabwean enterprise no better positioned than before.
Weak governance within cooperatives themselves, a concern raised in Zimbabwe’s own policy discussions and well-documented in the international cooperative literature, can further undermine lender confidence precisely when the reformed Act is trying to build it.
None of these constraints are unique to Zimbabwe, and none of them are arguments against the reform agenda. They are arguments for sequencing it correctly, formalisation incentives and financial reporting support delivered alongside, not after, the legal reform itself.
Recommendations
It is on this last point that Sankofa Capital’s advisory perspective is most directly relevant, and where I would offer the following recommendations to policymakers, financial institutions and the development finance community engaging with Zimbabwe’s SME sector.
First, the ZEEX will only succeed if it is paired with a deliberate build out of nominated adviser capacity and a formal invitation to Zimbabwe’s pension funds, which control the largest pool of patient domestic capital in the country, to allocate a modest but committed percentage of assets to a ring-fenced SME bond or equity sleeve, following the institutional anchor model that has underpinned AltX’s relative success.
Second, the National Venture Capital Company’s tax exemption regime should be extended into a broader angel investment framework, with clearly defined eligibility thresholds, to mobilise diaspora and domestic private capital at the pre-institutional stage where the current fund cannot efficiently operate.
Third, credit guarantee schemes, ideally structured as public-private investment vehicles co-capitalised with development finance institutions such as the African Development Bank and the IFC, should be prioritised over direct lending, since guarantees crowd in commercial bank balance sheets rather than substituting for them.
Fourth, the artisanal mining sector needs a specific royalty-backed lending facility, built on verifiable production and assay data already collected through existing formalisation processes, that treats future gold output as collateral in the way Ghana’s model demonstrates is possible.
Fifth, public procurement reform that reserves a defined share of Government contracts for registered SMEs and cooperatives would do more to incentivise formalisation than compliance enforcement alone, since it converts formal status from a cost into a commercial advantage. Finally, none of these instruments will function without better data.
A national SME registry, built from the Economic Census baseline and updated through the same digital rails the ministry is already deploying for its decentralised district officers, should underpin all future policy design, since credit guarantee schemes, venture funds and junior exchanges alike depend on lenders and investors being able to see the sector clearly enough to price its risk.
The Ministry of Women Affairs has done something genuinely significant in placing this agenda at the centre of national policy rather than at its margins.
The measure of that achievement will not be the indaba itself, nor the communique it produced, but whether the reformed Cooperatives Act, the venture capital company and the new entrepreneurship exchange are matched, in the months ahead, by the unglamorous supporting infrastructure, data, guarantees, institutional capital and skills that have determined success or failure everywhere else this model has been tried. Zimbabwe has, for the first time in some years, a coherent architecture rather than a scattering of initiatives.
Building it out well would represent one of the more consequential economic reforms of this administration.
Farai Ian Muvuti is chief executive officer of The Southern African Times and managing director at Sankofa Capital.
