Regulatory obstacles are one important reason. The Services Trade Restrictiveness Index, which measures the degree to which domestic laws and regulations hamper trade in services, shows that Zimbabwe is highly restrictive in communications (including mobile and internet), finance, and professional services in areas such as accounting, law, architecture, and engineering (Figure 1).

Greater trade in services would help retain young and educated workers and increase productivity and competitiveness of Zimbabwean firms while offering new opportunities for expatriates willing to return home. Other sectors, particularly manufacturing, would benefit from increased participation in services, which are key inputs in the production of many goods, and from knowledge spillovers.

According to a recent World Bank Country Economic Memorandum, services trade also offers a path to diversify Zimbabwe’s economy, which remains highly concentrated among a few firms and industries, including agriculture, mining, and tourism. A handful export products – mostly minerals and tobacco – generates the bulk of foreign exchange reserves. Agriculture maintains a sizeable share of production and employment and receives the bulk of lending, with significant government support and intervention.

Moreover, Zimbabwe has been struggling to attract foreign investment due to high inflation and an unstable exchange rate. These difficulties significantly hamper trade in goods, which is more capital intensive than services.

Figure 1: Zimbabwe’s laws and regulations are more restrictive than those of peers.
(Services Trade Restrictiveness Index by sector)