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!

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