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Gvt Urged To Protect Big Businesses In Crafting Formalization Policies


Leading corporate executives are calling for government protection to ensure survival of big businesses when formulating policies tackling the scourge of informality in the economy, 263Chat-Business has learnt.

Due to the numerous difficulties facing the economy, Zimbabwe’s business environment has become increasingly informal in recent years, prompting authorities to create laws aimed at curbing the trend.

The new year saw the kicking in of new tax measures as announced by Finance Minister, Prof Mthuli Ncube in his 2024 National Budget that sought to protect “value chain integrity and transparency” by compelling manufacturers to only sell their goods to wholesalers who are registered for value-added tax and have tax clearance certificates.

The downside effect of the new measures as highlighted by industry players is the subsequent decline in volume sales for manufacturers as they are only allowed to sell to formal players.

“The regime of informalization policies must be assessed with the knowledge that informal sector survival can be enhanced by formalization policies,” said Oswell Binha, chairman of the CEO Africa Roundtable, a high-level platform for Corporate Chief Executive Officers and Senior Executives, in both Private and Public Sector.

“Informal sector can be free riders in the economy because they have the potential and capacity to not only go underground when regulation visits but can midwife economic crimes such illicit financial flows and smuggling.”

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While authorities are acting in good faith to tackle the scourge of informality by tightening tax policies, the measures are opening other unintended avenues for informal players to penetrate.

There are already widespread concerns over the influx of smuggled consumer goods being traded on the informal market at far much cheaper prices as compared to locally produced goods, a situation working to the detriment of local manufacturers.

“Striking a balance between the need for big business survival and encouraging formalization of micro, small and medium businesses have a multiplier effect of coordinated fiscal performance, economic performance and regulation among other benefits,” added Binha.

According to a recent study by the International Monetary Fund, Zimbabwe’s informal sector is the largest in Africa and is only second In the world after Bolivia.

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