LOCAL companies are struggling to access capital as traditional avenues for long-term funding remain effectively closed or severely limited, leaving the productive sector to grapple with “punitive” interest rates.
The domestic debt market remains thin, with no meaningful bond issuances, while the Zimbabwe Stock Exchange (ZSE) has struggled to facilitate significant capital increases.
Currently, local borrowing costs for ZimGold (ZiG) loans are priced above 45 percent, while United States dollar facilities range between 10 percent and 16 percent.
Offshore loans, when available, are largely short term and carry even higher costs.
Industry says it is increasingly relying on retained earnings as funding options narrow.
Confederation of Zimbabwe Industries Matabeleland Chapter president Mr Stephen Ncube said bank loans are largely short term and costly.
“When banks come to the party, it is mostly working capital and for a short term at high interest rates,” he said.
He also urged the authorities to rebuild confidence in the capital market.
“The capital market needs to be deepened and regulated and guarded against capital flight to avoid the issues we had with merchant banks before. This will improve confidence in investors to participate more,” he said.
In its trading update, ZSE-listed clay brick manufacturer Willdale Limited said liquidity constraints continued to limit access to working capital and funding for capital expenditure.
According to the company, limited working capital negatively affected
production, with extrusion volumes down by 28 percent and fired production down by 52 percent.
Willdale chief executive officer Mr Nyasha Matonda said the company had to resort to selling stands in the Haydon Industrial Park as attempts to get funding from local banks had proved futile.
“Since we started selling stands, our working capital condition has significantly improved,” said Mr Matonda.
Another ZSE-listed entity, Art Holdings Limited, said liquidity remained constrained and high borrowing costs persisted.
In a trading update, the company said market demand for Exide batteries and Eversharp pens was firmer, but “the cumulative impact of working capital-induced production disruptions” and logistical delays affected volumes during the period ended December 31, 2025.
SME Association of Zimbabwe (SMEAZ) founder and executive officer Mr Farai Mutambanengwe said members
have resorted to in-house funding
schemes and informal borrowing for capital funding.
“SMEs mainly are getting short-term funding through microfinance institutions or other arrangements. For example, we have a savings and credit cooperative, others just borrow informally, but it is difficult to borrow through the bank, although sometimes it is possible,” he said.
“If someone has title deeds, then typically, yes, they can borrow through the bank, but without title deeds, then they have to go through the other arrangements.”
Despite market perceptions of a credit freeze, the Bankers Association of Zimbabwe (BAZ) argues that the sector remains active, albeit focused on high-priority productive sectors.
According to the Mid-Term Monetary Policy Statement, 71,79 percent of total banking sector lending is currently directed towards manufacturing, agriculture and mining.
Productive sector bias
BAZ chief executive officer Mr Fanwell Mutogo, however, rejected the notion that financial institutions are reluctant to lend.
“While we understand the frustration regarding the
cost and availability of capital, the narrative that banks are a ‘non-starter’ is not supported by the data. Banks are fully committed to their intermediation role,” said Mr Mutogo.
He said lending patterns show a clear tilt towards productive sectors.
“It is incorrect to suggest that banks are not lending. Banks have prioritised the productive sectors — manufacturing, agriculture and mining — over consumptive borrowing to drive economic recovery,” Mr Mutogo added.
Official figures indicate that loans to the productive sector account for about 71,79 percent of total banking sector lending.
“This demonstrates that the vast majority of banks’ liquidity is being channelled directly into company operations rather than speculative or consumptive activities.”
While long-term development finance remains elusive, Mr Mutogo argued that international capital has not entirely dried up. Local banks have continued to access external lines of credit to support exporters and strategic industries.
“Banks have been receiving external lines of credit from institutions such as Afreximbank, Trade and Development Bank (TDB), and the European Investment Bank,” he said.
The difficulty, however, lies in the structure of these facilities.
“The challenge is not the absence of funds, but the tenor. These are largely short-term trade finance facilities of between 12 and 24 months, whereas our industries desperately need long-term retooling capital of five to ten years.”
On interest rates, Mr Mutogo stressed that banks are being affected by macroeconomic constraints.
“Banks do not set these arbitrarily. With the bank policy rate at 35 percent to curb money supply growth, commercial lending rates must naturally align with this benchmark to remain positive in real terms.”
As inflation stabilises, he added, borrowing costs should gradually follow.
“As we have seen monthly ZiG inflation stabilising, averaging below 1 percent in the mid-year period, we expect lending rates to adjust in line with these prevailing inflation trends in the near future.”
For many companies, however, that adjustment cannot come soon enough.
Economist Mr Malone Gwadu says firms have little room to manoeuvre outside banks and capital markets, which themselves remain underdeveloped.
“Zimbabwean corporates have very limited funding legroom outside capital markets and banks as our financial markets generally are still yet to be deepened to avail other financing instruments,” Mr Gwadu said.
As a result, businesses are increasingly relying on internally generated funds.
“This is why most companies are on a cost-containment overdrive as internally generated funds at the moment are the only viable option,” he added.
Liquidity preservation has become as important as profitability.
“Over and above chasing profitability and viability, liquidity conservation has also been a key factor driving cost containment by Zimbabwean corporates so as to avail funding for expansionary and capital projects.”
In practice, this has meant postponing major capital expenditure, sweating existing assets and focusing on projects that can be funded from retained earnings.
Economist Mr Enoch Rukarwa frames the challenge in more theoretical terms.
“From a theoretical perspective, what you note there is that there are two sources of capital, which is either debt or equity,” he says.
Both, he notes, are presently constrained.
“Debt in Zimbabwe continues to be very costly. On the USD side, you are looking at interest rates averaging between 15 percent and 25 percent, and on the ZiG, you are looking at rates northwards of 40 percent,” Mr Rukarwa says.
On the equity side, platforms such as the Zimbabwe Stock Exchange and the Victoria Falls Stock Exchange exist, but activity has been muted.
“We have not seen pronounced capital raising or corporate actions, and this has been predominantly to do with macroeconomic dynamics, limited liquidity in the economy, limited patient capital … that has been the colour of our economic circumstances in the immediate past, when you are looking at five to ten years,” he said.
With both debt and equity constrained, companies are being forced to rethink growth strategies.
“In terms of how companies can source capital in the midst of limited liquidity, both from a debt and equity perspective, organic growth becomes an option,” Mr Rukarwa added.
This involves minimising overheads, preserving cash and focusing on incremental expansion rather than large, debt-funded projects.
He believes that the current structure of the economy offers a narrow but meaningful window of opportunity.
“This window of dollarisation between now and 2030 creates a stable or relatively stable environment for growth,” he continued.
Rather than focusing on defensive strategies such as hedging and capital preservation, firms can prioritise revenue growth, cost control and product expansion.
“The market is there,” Mr Rukarwa said, “But it is now an issue of tapping into the available market by creating relevant product portfolios, suiting the informality we have in the economy, suiting the cash economy and suiting the dollarisation that has been dominating the performance and structure of our economy.”
Taken together, the views suggest that while Zimbabwe’s capital landscape is undeniably constrained, it is not entirely devoid of options. – Herald
