Unregistered Small and Medium Enterprises (SMEs) are set to miss out on various stimulus packages during and post the Covid-19 pandemic, analysts have warned.
Zimbabwe has one of the world ‘s biggest informal economies and most business establishments prefer to operate unknown in order to evade payment of tax and other statutory costs.
However, due to inactivity since the start of the lockdown on 1 April, most SMEs find themselves in serious recapitalisation constraints.
Government has since promised an over ZWL$ 200 million bailout package for businesses, including emerging ones but there are fears non-registered entities may struggle to access loans.
“If a business is informal and does not have any documentation it will be very difficult for the business to access any financial assistance and this has been the downfall of most emerging businesses,” economic analyst, Pepukai Chivore told 263Chat Business in an interview.
Zimbabwe’s burgeoning informal economy, is the second highest in the world after Bolivia and contributes over 50 percent to gross domestic product.
Just above 60 percent of the Zimbabwean work force operate in this sector yet it contibutes just 20 percent of tax revenue to the Zimbabwe Revenue Authority.
However, SMEs are often regard too risky clients to lend and more so non-registered ones.
In 2018, SMEs only attracted 3.78 percent of total banking sector loans, the Reserve Bank of Zimbabwe figures show.
But with over 5 million SMEs (both registered and one registered) observers say authorities should crafts ways to bailout these emerging businesses to minimise the impact of the Covid-19 pandemic on the economy.
“In any bailout package there should be a way of finding how to bailout the informal sector. We can work with informal sector associations to identify beneficiaries and they can try to work out modalities of how those loans maybe be repaid,” Chivore added.
Already the sector has conceded massive losses during the past one and a half months in lockdown and is in need of hundreds of thousands of dollars so far, the SMEs Association of Zimbabwe recently said in an interview.
With the government having ordered informal sector players to remain in lockdown during the second phase as authorities gradually opens the economy, the sector is in dire strain.
