An Investigation into the financial challenges affecting state-owned enterprises in Zimbabwe. A Case of Zimbabwe Consolidated Diamond Company (ZCDC)

Abstract

State-owned enterprises (SOEs) play a pivotal role in Zimbabwe's socio-economic development through employment creation, revenue generation and provision of strategic goods and services. However, many SOEs continue to face persistent financial challenges affecting their operational efficiency and long-term sustainability. This study investigated the financial challenges affecting the Zimbabwe Consolidated Diamond Company (ZCDC). The objectives were to identify the principal financial challenges, examine internal and external contributory factors, assess their impact on organizational performance and recommend practical strategies for improvement. The study adopted a convergent parallel mixed-methods research design within a single case study framework. Data were collected using structured questionnaires administered to 59 managerial and supervisory employees and documentary analysis of financial statements and Auditor-General's reports covering 2020-2025. Quantitative data were analyzed using descriptive and inferential statistics, while qualitative data were analyzed thematically. The findings revealed that ZCDC faces severe financial distress characterized by chronic working capital shortages (96.6% agreement), supplier payment delays (91.5%) and accumulated short-term debt (88.1%). Both internal weaknesses including weak financial controls and irregular procurement and external factors particularly excessive fiscal regime (10% royalty on gross revenue) and exchange rate volatility contributed significantly to these challenges. Documentary analysis confirmed deteriorating financial performance, with the current ratio declining from 0.78 to 0.43, debt-to equity ratio escalating to 3.68 and net profit margin widening to -6.5%, culminating in a going concern warning in 2025. The study recommends reducing the royalty burden, permitting export earnings retention, professionalizing board appointments, strengthening procurement transparency and improving cash flow forecasting strategies. The study contributes empirical evidence to understanding SOE financial distress in resource-rich developing economies.