The 2026 national budget: Mthuli must be stopped!
by Itai Zimunya- Senior Economist with the Eastern Caucus in Mutare.
The recently presented 2026 national budget statement has
ignited fierce debate within policy circles. The Minister of Finance states
that his policy intention has three targets, that is, a) stability, b) growth and c)
transformation. On the other side, some policy analysts argue that the budget
statement is counter-productive. This piece contributes to the ongoing debate,
with the hope that, maybe, or, in fact, that Parliament must stop Minister
Ncube and ensure that he corrects his proposed policy prescriptions. The
intention is not academic, but to ask Parliament to call for a comprehensive philosophical
policy rethink by actors along Samora Machel Avenue. This write-up presents our
marking scheme as well as proffer better solutions to move Zimbabwe forward.
It is clear that Minister Ncube framed the 2026 budget on
orthodox economics, that is, generally assuming that one plus one equals two. Whilst
this is a universally accepted mathematical permutation, framing a national
budget needs a variety of frameworks. The multiplicity of interests and,
broadly, the targets of growth and stability often compete.
Whilst there are several points combining to build a strong
case for a budget revision, this article isolates the introduced cash
withdrawal levy at Section 722 of the National Budget. This new levy simply
intends to choke the informal sector. Mthuli’s economic orthodoxy assumes that
when the government fatally taxes the informal sector, conveniently called the “emerging
sector”, it will naturally collapse, thereby creating space for Foreign Direct Investment
(FDI).
In section 724 of the Budget, Minister Ncube says, “… The
continued increase in cash withdrawals, which reached US$353 million in June
2025, heightens risks of informality, tax evasion, corruption and
administrative inefficiencies”. In
short, he finds it problematic that this emerging sector withdraws its USD
through the Automated Teller Machines (ATMs). The Minister wants people and
companies to reduce or stop getting USD from ATMs.
In section 725, the Minister clarifies his wrong
prescription “… it is imperative to introduce measures that discourage
excessive cash withdrawals, enhance transparency, strengthen tax compliance and
gradually shift economic activity toward formal and digital payment platforms”. Kindly note the characterisation of these cash
withdrawals as “excessive”.
How can people keep their USD in banks when the policy
makers are threatening mandatory return of the Zimbabwe Gold (ZiG) as the sole
currency on a date and path unknown as if ZiG is a new Jesus Christ? How can people
keep money in banks that charge hefty average $20 per month as bank fees in
addition to a myriad of other fees and taxes? Is the Minister aware that elsewhere
in the southern African region, including Mozambique, Tanzania, Botswana and
Zambia, bank deposits are protected, earn interest and actually grow every
month?
Why then punish a growing, struggling, self-financed
informal/emerging sector for reasons beyond them?
This is where the Minister and economists on Samora Machel
Avenue miss the point. They take this “emerging sector” growth as wrong, evil,
bad and needing “punitive taxes for it to reform within 40 days. Their hope is
that, come January 1 2026, this “emerging sector” must toe the line or suffer.
In the paragraph below, we wish to display how and why the
Minister’s orthodoxy reading is reactionary, simplistic and a bit dangerous. Yes,
dangerous!
The Zimbabwean economy and its historiography, sociology
and politics require a broader and less Eurocentric set of analysis.
One fine scholar, the late Professor Sam Moyo of the Sam
Moyo Institute of Agrarian Studies (SMAIS) studied Zimbabwe and made a seminal
conclusion. He found out that Zimbabwe’s
economy presents what he called a heterogenous paradox. In other words,
growth is coming from sectors and or through models not often associated with
growth. In reality, Sam Moyo, focusing on agriculture years after the land
reform program, noted that the small-scale farmers’ produce was increasing even
though, then, before 2007- the aggregate national production was still lower
than that of the 90’s. So, even though the production of the small-scale sector
was rising, the national story was different. This is the paradox.
Now, twenty-four years later, the story has changed. The
paradox has entrenched to such an extent that it must be taken as the new
normal.
Here is why.
Zimbabwe’s growth is being powered by the informal sector
and Diaspora remittances. Zimbabweans working abroad are anticipated to remit
$2.7billion USD in 2025. The plus 70% Zimbabweans in the so-called “informal
sector”- or what the Minister calls the “emerging sector” produce an average
65% of Zimbabwe’s maize, gold, and tobacco. The Zimbabwe National Chamber of
Commerce (ZNCC) posited that this sector contributed 76% to aggregate demand
using the Purchasing Power Parity (PPP) measure. In this 2026 budget, Section 722,
Minister Ncube says this emerging sector accounts for a “substantive share” of
the cash transactions in Zimbabwe. This confirms our thesis that this informal
sector is the current hub of the economy.
In the 2025 fiscal year, there is global consensus among
many policy actors including the World Bank, the Government of Zimbabwe, and
the International Monetary Fund (IMF), that the Zimbabwean economy will grow by
6.6%. This growth is not coming on the background of FDI or some big money
coming out of Europe, the United States, or China. No!
It is this emerging sector that Mthuli wants to kill. It
is the Diaspora sacrificing their sweat and blood to develop their villages,
plots and houses.
Secondly, this proposed “withdrawal tax” is a big move
aimed to reverse the ongoing economic revolution in the gold, maize, tobacco,
construction and retail sectors.
It seems the Minister is suffering from nostalgia or some
European-economic-infatuation. He expects the Zimbabwean economy to go back to
the 1975 formal economy that was associated with large manufacturing firms across
Zimbabwe, or to follow the European model of industrialisation associated with
these mega factories.
Whilst we agree with the endgame that Zimbabwe must, sometime,
build mega factories to export its technologies, goods and services, the mode
of transformation must not be binary or substitutive: to kill the informal sector and build the
formal sector.
Thirdly, today’s emerging/informal economy did not just
emerge from nowhere, but was created by the very same government. Perhaps the
only difference is that the foundations of today’s economy were set by the
first republic post-2000. The government of Zimbabwe invested huge sums of
money, political will and time to support small-scale miners, brought in 1.2
million people into small-scale agriculture through the A1 and A2 models. Now,
fifteen years later, those investments have started bearing fruit. Small-scale
miners, or “emerging miners” are producing more than 24 tons of gold versus big
Zimbabwe Stock Exchange and Johannesburg Stock Exchange-listed mining giants. The
big mines only produced 35% of the gold in 2024. Emerging farmers are
contributing an average 65% of maize and tobacco deliveries to the Grain
Marketing Board (GMB) and to tobacco auction floors, respectively. The retail
industry has also indigenized, of course, within the informal or emerging
space.
The economic base has changed significantly, and it is
not bad. How does the Minister expect emerging entrepreneurs to build mega
factories without access to credit. The stock markets are still largely
colonial and parked far away from the masses.
The Minister, in doing his corrections, must answer the
question: how to grow and formalize the informal/emerging sector (and not how
to kill it).
Fourthly, how can the Minister conclude that withdrawing
$353 million per month is excessive by a sector that receives $2.7 billion from
the Diaspora in addition to earnings from tobacco, maize and gold? The emerging
sector is much broader, including an increasing quantum in the manufacturing
sectors like plastics, clothing, food, as well as the retail sector.
Fifth, this emerging sector employs the biggest number of
people in Zimbabwe. Yes, the jobs are informal-but because people live every
day, families are getting sustained.
Sixth, the fact that this “emerging sector” is not
banked is not its problem. Banks in Zimbabwe are still in 1980. They still bizarrely
require a proof of residence, a three-month salary statement among a litany of
other requirements for one to open a bank account. For one to get a loan, they
require a title deed. These requirements are part of the orthodox that,
unfortunately, reflect an old and vanishing characterization of the economy as a
forte for male and of the property class only. In Botswana, the US, Europe or
other innovative societies, governments and private funds have been set aside
to support innovation hubs. Ideas run the world- not title deeds or proofs of
residences, among other old-fashioned requirements that bureaucrats in Zimbabwe
banks still require. There is no direct and positive corelation between having
smart business ideas and a title deed. The earlier government, banks and other
venture funders realise this, the better.
The so-called ama 2000’s are way ahead now. They park
their money in bitcoins among other online financial instruments that require
fingerprints or other biometric forms of identity as security passwords.
If Zimbabwe’s financial sector, including banks and insurance
firms still expects well-manicured clients in Gucci and Versace suits as their
source of business, they might also, soon, find themselves on the ropes. I
salute some business development managers for Meikles Holdings group, Dairiboard,
among other local manufacturers. Meikles Holdings quickly closed its big
departmental stores and subdivided them into smaller units for rentals to this “emerging
economy”. Dairiboard and other local producers changed their route-to-market by
going directly to the “tuckshops” and other smaller traders. Why? They pay cash
on delivery and do not negotiate 30-day terms associated with bigger retailers.
A new economy has emerged. It did not mushroom from the
sky but was created by the government of Zimbabwe through land reform and indigenization
programs. That is why this budget is toxic and dangerous.
Instead of using a stick to scatter, we propose that the
Minister throws a lot of carrots into this emerging economy.
These carrot policy measures include,
a)
Facilitate
convenience and ease of business registration – Zimbabwe is fairly small, with a
population of 17 million people. The government must invest in an
all-of-government cloud-based biometric system that services all of government
and avoid the need for production of National Identity cards when dealing with
government.
b)
Instead
of taxing bank-withdrawals, the Minister must, conversely, promote financial
inclusion by reducing bank charges from the current 3% plus an average $20
bank-fees per month. Minister Ncube must assess the situation within the
Southern African Development Community (SADC) where bank balances earn interest.
In Zimbabwe, depositors’ balances reduce every month. Which normal person would
keep their $500 USD in the bank when they know that within 30 days, their balance
could reduce to $478? More fees and taxes risk harvesting the reverse: more pillow
banking and deeper informalization.
c)
The
Minister must cast away the “them and us” lens on the economy and take
the economy as one constituted by different parts. Dr Godfrey Kanyenze wrote
extensively on dualism in the title ”Beyond the enclave”. This othering of the
majority is dangerous. From a political perspective, after all the investments in
land reforms, mining mechanisation, maize production, among others, why would
the Minister want to kill these sectors? The majority of Zimbabweans in the
informal sector earn better average monthly incomes, albeit unstable, than
their formally employed counterparts. They need more policy support, not taxes.
d)
On
Diaspora remittances, the Minister must make it easier for the Diaspora to send
in more money by giving some incentives like access to agricultural land,
access to mining claims, discounted holiday packages at national parks among
others. When more money flows in, the better for Zimbabwe.
e)
Export
substitution scheme must be supported to ensure growth of the local
manufacturing sector. Trade barriers must be removed including that 30% forex
retention scheme by Government. If these emerging farmers and Makorokozas can
produce 65% of maize, tobacco and gold- how and why would they fail to produce
lemons, macadamia and flowers for export?
Policy consistency and policy
congruence are crucial. The proposed 2026 budget is a sharp departure from the
earlier policies of indigenization, entrepreneurship and land reform. This
nostalgic expectation that Zimbabwe will go back to a European type of an
economy with big firms and above 80% formal employment is not likely to happen
in the short term. If that is to happen, it will not likely be a result of “taxing
this emerging economy”- but supporting them to grow. Zimbabwe must learn from
Asia, Ethiopia and Kenya. Small milk, goat and avocado producers of Ethiopia
and Kenya were not taxed to die- but supported through targeted value chain
systems. They grew and now employ many more people.
We conclude with a call for African economists
to study this notion of heterogenous paradox to help other developing economies
in Africa. Our growth and happiness will not likely come from wanting to mirror
Europe’s developmental model. The advent of technology and new possibilities
means that Africa’s growth, as Zimbabwe is witnessing, might come from non-expected
corners. That is okay. As Chinese philosopher, Deng Xioping said, “I don’t mind
the colour of the cat, so long it catches mice”. On the same note, Minister Ncube
must reduce taxes, continue to ease the cost of doing business, seal possible
avenues for corruption or rent seeking, digitize the regulatory systems and
lead in using the ZiG.
To prosperity!
ends//
