You will see this error if a Managed Identity has not been assigned with the correct permissions to the ZCA VM in Azure as defined in the document "Zerto Virtual Replication Installation Guide for Azure".

When installing or upgrading Zerto Virtual Replication (ZVR) for Azure to versions 7.5 or 8.0, there is a box presented to "Verify Permissions". Selecting this box may result in an error "Managed Identities is not enabled".  You may also see this error during the upgrade validation as "Failed to verify Managed Identities is not enabled"

Zerto Azure 7.5 introduced permissions defined by a System assigned Managed Identities.  Follow the instructions starting on page 11 of "Zerto Vritual Replication Installation Guide for Azure" for "Enabling Managed Identities and Setting Mandatory Permissions in Azure":

Zerto Azure 8.0 switched to using User assigned Managed Identities for permissions. Follow the instructions starting on page 11 of "Zerto Vritual Replication Installation Guide for Azure" for "Enabling User Assigned Managed Identities and Setting Mandatory Permissions in Azure"

Once these permissions are enabled, it may take up to 30 minutes for changes to take effect.  The validation should pass once the permission has been propagated by Azure.