Growth strategies and quality employment generation are key factors towards the formalisation of Zimbabwe’s economy.
The informal sector contributes above 70% of the country’s GDP. According to Zimstat’s labour force survey for the fourth quarter to December 2021, the informal sector is the biggest employer of the labour force accounting for 46.4%, with most employees in the sector being in wholesale and retail trade, sale and repair of motor vehicles.
Taking into account different definitions, earlier studies indicated that the informal sector was relatively small during the early 1980s, accounting for less than 10% of the labour force. However, later studies suggested that the share of informal sector employment grew from less than 10% of the labour force in 1982 to 20% by 19887 and 27% by 1991.
In 2018, the International Monetary Fund reported that Zimbabwe had the world’s third largest shadow economy, accounting for 60.6% of total output, only after Bolivia (62.3%) and Georgia (64.9%).
During a dialogue between the Zimbabwe Economics Society, International Labour Organisation, United Nations Development Programme and the ministry of Public Service, labour and social welfare, on the proposed national formalisation strategy, Labour and Economic Development Research Institute of Zimbabwe (LEDRIZ) Director, Godfrey Kanyenze said the transition from the informal to the formal economy aims at promoting decent work for all which leads to inclusive development.
“As most people enter the informal economy not by choice but as a consequence of a lack of opportunities in the formal economy, formalisation should go hand in hand with ensuring opportunities for income security as well as livelihoods and entrepreneurship.”
Kanyenze said the regulatory environment including enforcement of ILS and core rights is a major factor towards the formalisation process. Zimbabwe’s regulatory environment is characterised by a cumbersome registration system, punitive taxation system and outdated local authority regulations and by-laws. The country also has unregulated labour brokering practices that exclude the informal economy from social security coverage.
Government was urged to actively interact with the informal community to create conditions that will lead to the demise of informality in the country. This can be done through educating informal firms on the benefits of formal registration, providing adequate information on the process and the procedures involved, and participating in social dialogues to understand issues that affect the sector.
Kanyenze added that targeted policies for specific groups of workers and economic units in the informal economy are also important to promote the transition to the formal economy.
“Policies tackling structural drivers of informality such as the extension of social security coverage, improved compliance with the law, including with international labour standards, and organizing informal workers and employers through integrated approaches to formalization is very important in this process.”
ILO Informal Specialist, Annamarie Kiaga further said that adopting a human-centred approach to create decent work by formalising the economy will help Zimbabwe develop.
“Formalisation of the informal economy consists of processes of not only reducing decent work deficits in the informal economy, for both workers and economic units, but also creating an environment that facilitates transition from the informal to the formal economy by making it desirable, affordable and profitable” she said.
In November last year, the government began consultations towards formulating a comprehensive Small to Medium Enterprises (SMEs) formalisation strategy. This followed the realisation that informal workers and economic units are more exposed to high vulnerability and decent work deficits, including inadequate and unsafe working conditions, lower productivity and incomes, longer working hours, exclusion from social protection schemes, and the lack of collective bargaining and representation rights, though this is not always the case.
Currently, entrepreneurs are required to register their informal businesses with different government organisations, including the Zimbabwe Revenue Authority, the National Social Security Authority, the Zimbabwe Manpower Development Fund, and the registrar of companies.