U.S. Government Flags Zimbabwe’s Rigid Labour Laws in Investment Climate

The U.S. flags Zimbabwe’s restrictive labour laws as a barrier to investment, urging reforms to improve business flexibility and economic competitiveness in 2025 (image source)

HARARE – The United States government has raised concerns over Zimbabwe’s restrictive labour laws, describing them as a major impediment to business flexibility and economic adaptation. The remarks were made in the recently released 2025 Zimbabwe Investment Climate Statement, compiled by the U.S. Department of State.

The report highlights that Zimbabwe’s labour framework makes it extremely difficult for employers to adjust staffing levels in response to economic downturns. It cites stringent retrenchment procedures, limited scope for contract termination, and bureaucratic hurdles that discourage foreign direct investment (FDI). “Zimbabwe’s rigid labour laws limit the ability of businesses to respond to market shocks,” the report states. “This undermines competitiveness and discourages long-term investment.”

The critique comes amid a wave of retrenchments across Zimbabwe’s formal sector, as companies grapple with inflation, currency instability, and declining consumer demand. In September, Public Service, Labour and Social Welfare Minister Edgar Moyo announced that the government would investigate improper retrenchment practices, warning employers against terminating staff only to rehire them under temporary contracts. “We will not tolerate exploitative retrenchment schemes,” Moyo said. “Employers must follow due process and respect workers’ rights.”

Labour unions have welcomed the government’s stance but say enforcement remains weak. The Zimbabwe Congress of Trade Unions (ZCTU) has accused some firms of using loopholes to avoid paying severance packages and benefits. “We’ve seen cases where workers are dismissed and rehired under casual contracts to bypass labour protections,” said ZCTU spokesperson Japhet Moyo.

The U.S. report also notes that while Zimbabwe has ratified key International Labour Organization (ILO) conventions, implementation remains inconsistent. It calls for reforms that balance worker protection with business flexibility, including streamlined retrenchment procedures and dispute resolution mechanisms.

Economists say the issue is part of a broader challenge facing Zimbabwe’s investment climate. While the country has made progress in stabilizing its currency and improving infrastructure, regulatory uncertainty and policy inconsistency continue to deter investors. “Labour reform is essential if Zimbabwe wants to attract sustainable investment,” said Dr. Prosper Chitambara, senior economist at the Labour and Economic Development Research Institute of Zimbabwe (LEDRIZ).

The government has pledged to review labour laws under its National Development Strategy 1 (NDS1), but no concrete proposals have been tabled yet. Business leaders are urging authorities to consult widely and ensure reforms are inclusive and transparent.