Is a manufacturing boom of this scale actually sustainable, or is it merely a temporary spike? The question is now dominating discussions across Zimbabwe’s industrial sector as findings from the State of the Industry and 2027 Prospects Report reveal expansion in production capacity.

Having historically recorded modest economic contributions, the manufacturing sector has rapidly emerged as the leading driver of gross domestic product (GDP) at 17,1%, prompting analysts and business leaders to examine the sector’s future trajectory.

According to Africa Economic Development Strategies (AEDS) executive director, Professor Gift Mugano, the surge is built on durable, long-term fundamentals.

Addressing concerns over long-term viability, Prof Mugano pointed to clear evidence from the study showing that capital is actively flowing into physical infrastructure and productive capacity rather than short-term consumption.

He noted that national import trends are shifting away from finished consumer goods and toward long-term industrial capability.

“30% of our total imports are equipment and machinery. Out of an estimated US$10 billion total import bill this year, about US$3 billion will go directly into machinery for industry. This shows we are laying a foundation to support industrialisation and move manufacturing towards a 25% share of GDP,” said Prof Mugano.

Where the money is going

A primary driver of this positive outlook is the strategic deployment of commercial credit across the country’s industrial zones. Rather than funding operational deficits or short-term debt, corporate financing is actively modernising production floors.

“Our study shows that 81.9% of loans extended to industry are going towards building a strong industrial base. Specifically, 35.5% went toward new equipment and machinery, while approximately 10% was directed to warehouse construction to support expanded logistics,” Prof. Mugano said.

The report also indicates that roughly 10% of industrial financing is backing new product development and market expansion, with another significant share funding facility retooling.

“The fact that we are investing in new machinery, facility retooling, modern warehouses, product development, and new export markets demonstrate that we are establishing the necessary infrastructure to propel long-term growth,” he added.

This sustained capital investment has resulted in a younger, more technologically competitive industrial setup.

“It is particularly refreshing that 65% of our industrial machinery is now less than 10 years old. This modernisation ensures our manufacturing sector operates with efficient, competitive equipment that can sustain growth over time,” noted Prof Mugano.

Production and employment outlook

Looking ahead, business sentiment reflects this structural transformation. Elevated capital investments are expected to translate directly into higher industrial output and new job creation over the coming year.

“A significant share of surveyed companies, 49%, confirmed they will increase production investment next year. Higher investment directly boosts manufacturing output, which sustains overall economic growth. Furthermore, 39% of firms indicated they will be creating new jobs,” Prof Mugano said.

Key policy drivers

The factory-floor modernisation is supported by overarching government policy frameworks, specifically the Zimbabwe National Industrial Development Policy 2 (ZNIDP 2) and the Local Content Strategy.

“These two policies will shape the industrial landscape in a disruptive, positive manner. The local content initiative aims to substitute between US$2,5 billion and US$3 billion in imported inputs.

“This localisation of value chains will expand domestic production and solidify manufacturing as a major GDP pillar,” explained Prof Mugano.

Supported by sector-specific strategies, the Industrial Development Fund, and duty-free machinery imports, Zimbabwe is positioning its industrial base not just for a seasonal rebound, but as a central engine for export diversification, import substitution, and sustained economic growth.

Why pension funds hold the key to Zimbabwe’s industrial transformation

While modern machinery and policy frameworks are laying the floor for this industrial surge, Prof Mugano stressed that a critical piece of the sustainability puzzle remains locked away in institutional vaults: long-term, low-cost capital.

Addressing the financing bottleneck facing domestic factories, Prof Mugano pointed out that the argument over a lack of domestic long-term capital is fundamentally flawed.

In reality, Zimbabwe’s pension fund market currently sits on an estimated US$3 billion pool of liquidity—a balance that grows steadily month after month.

“We have on record US$3 billion in pension funds in terms of total balances in the market. In economics, pension savings are identical to investments. This money is invested in stock markets, money markets, commercial banks, and real estate. But the argument that there is not enough capital in the market to provide long-term finance—we violently refuse that. This argument is misplaced,” Prof Gift Mugano said.

Retooling factories over building malls

Currently, a significant portion of pension assets is concentrated in real estate and commercial shopping developments.

While single pension funds are capable of bankrolling individual US$50 million property construction projects, manufacturing leaders argue that national development policy must guide a larger share of these reserves directly into factory floors.

Prof Mugano stressed that while property development builds retail space, it does not build the production capacity needed to supply those retail shelves with local goods.

“There is nothing wrong with building properties or shopping malls—that is where retail happens. But we want to also create production so we don’t just sell foreign goods in those shopping malls. We need a regulatory framework where pension funds have a balanced portfolio, ensuring a reasonable amount of capital is set aside specifically for industrialisation,” he said.

Dismantling the cost of capital barrier

The push for pension-backed funding is aimed at solving a persistent industrial handicap: Zimbabwe’s reliance on raw material exports versus value-added finished goods.

Currently, raw and semi-raw materials account for 92% of total national exports, while manufactured commodities make up just 6.7% and services represent 1.3%.

To shift this balance, manufacturers require affordable, long-term financing, something current commercial lending practices fail to deliver.

“What came out from our study is that industry is crying for long-term finance which is also cost-effective and cheap.

“Currently, banks charge standardised interest rates regardless of the source of capital. If they source money offshore at18%, they charge 18%.

When they get money from pension funds, deducted directly from workers’ payslips at zero cost, they still charge 18%,” he added.