17/05/2018
ZIMBABWE ECONOMY IS DRIVEN BY THE SELF-EMPLOYED - 10 important messages from players in the Zimbabwe Informal Economy
“A Private Sector Dialogue Forum on the Informal Sector”[1] on 17 October 2017 in Harare brought together at least seven representatives from organisations[2] working with and representing players in the Zimbabwe Informal Economy to dialogue with experts and representatives from at least six organisations[3] engaged in the formal sector. Below are ten key messages I heard as a facilitator of the dialogue characterized by intense debates and engagements among all participants.
1. We need to stop the selective criminalisation of labour
Players in the informal economy are self-employed rather than sellers of their labour to others; so “why are we being criminalized?” – asked one of the players. Global lessons suggest the need for a systematic approach to the regularization and mainstreaming of informal economic activities. The case was made for a Self-Employment Policy (SEP) in place of Destroying Informal Systems. An appropriate SEP would moderate the movement of individuals from formal employment to self-employment, and sometimes back to formal employment as economic conditions change. Participants wanted to know why individual “consultants” are treated differently from “vendors” and both are sellers of labour? Participants argued that “decent jobs” in the current debates should give way to give way to “decent work” (and get rid of selective criminalization of labour).
In this debate, it is essential for players to understand WHAT is criminalized, by WHO, and WHY in order to move from criminalization to facilitation. “Dislocation and relocation should be within the Zimbabwe constitutional and legal provisions and frameworks” – said a leader of informal traders.
2. We need a paradigm shift from Day to Night Economies
The traditional and formal “Day Economy” has over the last two decades been dying at the hands of macroeconomic difficulties driven by policy inconsistencies; while a “Night Economy” as seen in a number of cities is now dying at the hands of old regulations being enforced in a radically different global economic climate. In this paradigm shift, we need to “tackle underlying causes of the vending problem instead of tackling economic symptoms” arising from a decaying economic structure. Local Government by-laws and national spatial planning guidelines would in such an approach inform “a new framework for utilizing revenue from the informal economy” rather than driving its players out of the market.
3. We need a Developmental State
“As a society, we need to give life to the vision of self-reliance, sustainable livelihoods, and empowerment through the informal economy” argued one of the players in the informal economy.
The many structural issues limiting the growth of enterprises from micro to small through to medium and large sizes need a partnership between the public and private sector, enabled by a State that promotes inclusive growth. The challenge is of ensuring that “government enables” business through appropriate SEPs instead of “controlling them”. SEPs would require the government to focus its attention to economic policy-making and a sound regulatory framework while moving away from competing with and seeking to control private sector, economic players. In a developmental state, the informal economy must “move from being on the table” (discussed as a problem) to “being at the table” (as a partner engaged in dialogue).
4. We are the main economy
It is estimated that 94% of Zimbabweans are in this economy; which is a change since the last FINSCOPE survey of 2012. It is estimated that US$7.4 billion is circulating in this economy, which is over 50% of the country’s GDP. As one of the leaders of informal traders observed:
“Government and the formal economy have no money, but people have the money. Lack of investment finance is a policy issue, not just about Foreign Direct Investments. If the Reserve Bank of Zimbabwe puts in place the right policies, we in the informal sector could finance capital investments instead of being just traders”.
5. We suffer from the poor financial inclusion
Many informal players have low incomes – it was stated that more than 50% of cross-traders make less than $100 a month, and what they needed are appropriately structured financial products.
In a situation where 70% of players in the economy are financially excluded, then it can be concluded that the 94% of the population who are in the informal economy are excluded; and therefore existing financial instruments are woefully inadequate to respond to the needs of this new economy. A key element identified in the evolution of supportive financial inclusion was the need to “reconcile the culture of loan non-repayment with good banking practices in order to support the design of sound financial products”
6. We need to innovate from traditional sub-sectors
The perspective was that as long the formal economy is “stuck” in the old ways of doing business and the informal economy remains in “vending” mode, innovation into new areas of business will remain difficult. There is a need for better responses from all players to address the missing links between informal and formal sectors as a way of innovating the whole economy into new sectors and sub-sectors.
7. We need to close gaps in policy contents and drivers
Evidence-based policy-making approaches are inadequate, and there is a recognition that evidence-based policy dialogue can lead to innovations within the “Informal-Formal Economy Arc” where formal employees become self-employed before graduating too and players in value addition in need of appropriate financial systems on the road to greater formalisation. There should be “no more talk shows and policies without implementation”.
8. We are poorly connected to formal economic structures and systems
Nearly 85% of players do not belong to any Business Membership Organization (BMO). Cost of membership to BMOs is considered an obstacle, but being non-members weakens the voice of informal players in the economy.
There are very few networks/linkages with formal businesses, a situation characterized by poor and weak “voice” for these players who also recognize the need for being united and better organized.
9. We recognize the need for respectful dialogue and business practices
The rights of different players in the economy need to be respected in order to build an integrated economy between vendors, street traders, small and large retailers, wholesalers, distributors, manufacturers, producers, and others acting in various capacities. This is the foundation for building an inclusive economy.
10. We can see seeds of The New Economy
The Old Mutual is building an SME Centre that will become a modern market for those transitioning from informal to formal trade, and this Centre in Harare offers a glimpse of new directions where traditional economic players engage the emerging players in order to create The New Economy through dialogue and collaboration. This trend in engagement underlines the need for a “unified voice from a Representative Organization by those who drive the informal economy” so that they can be more effective partners of other players in the economy.
The article was originally written and published by Mungai N. Lenneiye on
