Online Reporter
Debra Matabvu
Herald Reporter
Government will soon roll out an array of interventions to transition informal sector businesses into the formal economy, a move authorities say will unlock inclusive growth, expand the tax base and improve livelihoods for millions.
This comes against the backdrop of Zimbabwe’s vast informal sector, which is estimated to account for more than half of economic activity and employs the majority of the country’s working population, according to International Labour Organisation (ILO) data.
While the sector has become a key survival mechanism for millions, its expansion has also constrained revenue collection, weakened labour protections, undermined productivity and distorted competition with compliant formal businesses.
Under the National Development Strategy (NDS2), Government plans to operationalise a National Formalisation Strategy as a key policy instrument to address what it describes as the “mushrooming informality” in the business environment.
The strategy is intended to provide a coherent framework for transitioning enterprises and economic units from informality into the formal economy.
According to the policy blueprint, the strategy will promote inclusive economic growth by easing regulatory barriers, improving the business environment and supporting productivity enhancement, enterprise development and access to markets and finance for small and informal businesses.
“Furthermore, it will focus on strengthening labour market institutions, enhancing labour law compliance and extending social protection coverage to informal workers,” reads the NDS2.
“NDS 2 interventions towards the formalisation of the informal sector focus on making it more desirable, affordable, and profitable to operate formally by improving the business environment.
“Key interventions will centre around promoting the adoption of more formal structures and legal compliance through incentives and support services.
“This will entail streamlining business registration and tax systems, and providing technical support.”
NDS2 identifies complex regulations, high compliance costs and cumbersome administrative procedures as major obstacles to formalisation.
In response, the Government plans to streamline business registration and tax systems, simplify licensing requirements and rationalise official administrative processes to make compliance less burdensome and more affordable.
Presently, informal traders and small enterprises face multiple registration requirements across different agencies, high licensing fees and lengthy approval processes, which discourage compliance and push many businesses to operate outside the formal system.
Authorities believe that simplifying these processes and reducing the cost of formality — including lowering taxes and fees — will make formal operation more competitive and attractive.
Administrative inefficiencies and rigid controls on informal traders have also been cited as barriers to formalisation.
NDS2 proposes reviewing these controls to improve efficiency, reduce harassment and create a more predictable operating environment.
Beyond regulatory reform, Government plans to provide business support services and incentives to facilitate the transition.
