daniel chigunwe
The Second Republic has been committed to making sure Zimbabwe has a pro-business environment for everyone, and that means for large firms and for micro, small and medium businesses, with all sectors able to grow and flourish.
The Cabinet stressed this pro-business stance this week and is committed to creating a friendly environment, but one where all enterprises are registered and licensed and all who should be paying taxes are compliant.
It is important to note, in light of some of the statements from some in the formal business sector, that the Government is not playing favourites.
Its policy is to see high rates of economic growth led by the private sector, but is not particularly concerned over who in the private sector is leading the growth.
It is not going to rescue inefficient businesses or those that are losing out to competition.
If a business closes then perhaps someone better will agree to buy the assets, otherwise new businesses and more successful competitors will move into the gap and growth still moves forward and new jobs are still being created.
While formalisation of the present informal sections of the economy will help larger formal businesses by levelling the competition playing field, the prime reason for the Government’s formalisation drive has been to make sure that all businesses are licensed, have registered with Zimra and are paying whatever taxes might fall due.
Not only will the measures increase tax revenue, and although each micro or small business might not pay very much, and some people operating as a single trader will still see all their profit inside the zero percent tax bracket, the combined tax payments from so many tens of thousands of small businesses will add a noticeable sum to the tax revenue.
The Reserve Bank is keen to see all businesses using electronic money, ending so many problems that seem to rise when banknotes only are used, from tax evasion to smuggling out capital sums. Hence the new requirement that all businesses must have a point-of-sale machine able to use ZiG and foreign currency and must have a bank account.
The small business sector, where so many of these informal businesses are located, seems to be badly represented by the main organisations representing organised formal industry and all aspects of commerce. And as they find themselves being formalised they need to find their voice as well.
For a start, business licences need to bear some relationship to the size of the concern.
Small businesses in small premises should not be paying as much as a huge supermarket branch, for example.
Modern databases and other technology offer easy ways of having a something approaching a graduated set of fees for business licences.
With so many not buying licences in the first place, this has not really been as issue.
As the formalisation enforcement proceeds, someone needs to be making sure the voices of the little businesses are heard as the voices of the large businesses are already being heard.
The tax law seems to be far better aligned to making sure that each type of taxpayer is covered and can submit taxes without too much difficulty.
Tiny undertakings are permitted to keep fairly simple accounts, nothing much more than lists of payments in and payments out, so the basic profit, on which tax is paid, can be calculated.
As the business grows the accounts need to become more complex, but few in the informal sector have yet reached the stage of having to register for VAT and calculate and pay this tax in two currencies. By that stage, these businesses will be large enough to need a properly qualified bookkeeper to keep track of everything.
The Cabinet this week confirmed that while it wants small businesses formalised, these enterprises are included in its business friendly policies, sometimes with extra benefits. The Government is trying to fill gaps such as the micro finance and small-scale loans many small businesses need, and where the formal banking sector is not really responsive.
The new Mbare Musika, temporary as it is, is a clear demonstration of the Government policy of moving the pro-business stance and support right the way down to the smallest entities and making sure they have the facilities and environment, including secure space without extortion, to conduct their trade.
Complaints from the formal sector are sometimes justified, such as the problem in some sectors of the need for multiple licensing, rather than having just one simple licence, and sometimes falling under multiple sets of regulations.
The Government is committed to making it easier to do business and in these sort of cases it should be possible to eliminate over-complex regulation, or at least simplify the regulations so they are all in one place and are easy to understand.
But established and formal businesses need to remember that no one is promising success to every business, although all are wished well, and there is no guarantee of eternal life in the business world. Companies come and go, and in the end what matters in the end is the growth of business and thus of the economy.
We also see new types of business enter the economy. For just one example, at the turn of the century running a phone shop was quite a good small business.
They disappeared as mobile phones proliferated, and now we have hundreds of small businesses selling and repairing phones.
The loss of the phone shops was covered many times by the new businesses.
Online Reporter