Informal sector approaches saturation

Albert Norumedzo In the Money
Zimbabwe’s informal sector is now approaching saturation as the number of participants is ever increasing with many economically active people seeking refuge from the shrinking formal sector employment.

As the only alternative to survival, the informal sector has come under immense pressure to support the population that finds itself in the unemployment and under employment pool.

As the volumes increase, signs of being overwhelmed are now evident in the informal sector. With origins dating back to the pre-colonial era when Industry was still in its infancy and could not accommodate the labour force, the informal sector has come a long way.

Accelerated growth in the informal sector bares testimony to a number of issues, chief among them the massive migration from formal to informal sector economic participation owing to the rapid deterioration of capacity in the former (termed informalisation of the economy in some spheres).

With limited options to make ends meet, over 90 percent of Zimbabwe’s population has been forced into some kind of informal sector activity to supplement inadequate formal sector income or derive the entirety of their survival.

With over 10 825 graduates being introduced into the shrinking job market from various tertiary institutions across the country each year on top of those who don’t take the education route, the informal sector has grown by more than 300 percent from an estimated volume and value of 28 percent of population and $50 million in value in 2000 to 87 percent of population and an estimated $750 million in value respectively in 2014.

An influx of participants coupled with failure of informal business operations to graduate into medium-scale with formalised operational structures despite the high velocity of money circulation) has seen growth on the volumes front outpace value of the informal sector.

It remains debatable just how much money is circulating in the informal sector and the spectrum of opinion ranges from as little as $200 million to as high as $3 billion. A common estimate has been in the range of between $500 million and $750 million.

The prevailing liquidity situation coupled with suppressed demand aggregates has starved the much needed support to the informal sector; consequently putting a ceiling on the sector’s potential to become more than just back yard industries.

What is clear, however, is that the numbers keep growing across all kinds of people, women, children, men, the elderly, the young and even the physically disadvantaged members of society.

The range of business activities is also wide, encompassing both legal, illegal, moral and immoral activities.

Despite the high level of academic and professional endowment in the country that keeps increasing each year, depressed economic momentum has seen a wave of economic informalisation reign through the nation. This has seen graduates and qualified professionals looking to the informal sector to make ends meet.

Some have suggested that perhaps the education model needs to changed or aligned to meet present needs.

The country’s education system should be skewed towards producing entrepreneurs with the ability to form and transform small businesses into formal multinational companies.

The informal sector is dominated by buying, selling and more importantly the transport business which has been the refuge to many unemployed man.

The transport business comprise commuter omnibuses, registered and unregistered taxis, to intra city shuttles (Mishikashika). The transport industry is by far the leading employer of Zimbabwe’s jobless youths.

Cross-border trading is another trade that has accommodated a huge number of the country’s unemployed.

Flee markets have sprouted up all over the City Centre, apart from the designated selling points like (Mupedzanhamo), which have since been overwhelmed.

Parking space all over the city has been converted to retail space, property owners have realigned property use to the current wave of retail shops, converting most accessible space to retail use.

Most of the space in town, which used to house offices at ground level has since been converted to retail space for clothing, electronics and accessories.

Then there are street vendors who have flooded the streets of Harare with all sorts of merchandise, from fruits and vegetables to pesticides and all you can name, not forgetting the Glen View furniture complex and many others like it around the country.

The informal sector without doubt has become the largest employer in the country. As the economic challenges take their toll on the economic trajectory, the informal sector has had to accommodate the growing number of desperate citizens scavenging for survival in the shadow economy as industry shrinks to the tune of the business cycle.

Among the top priorities of any Government are vital economic fundamentals such as employment, inflation and economic growth. Confronted by liquidity challenges, declining industry competitiveness and limited financial support from international partners, Zimbabwe faces a mammoth task to create jobs through industry revitalisation via sector recapitalisation and resuscitation.

Despite the anticipated energy projects among other infrastructural projects by Russia and China and other International partners, economic analysis dictates that it will take much more in the form of industry revitalisation to address the growing problem of unemployment

The financial services sector is the leading culprit in terms of layoffs and is set to pour in more into the unemployment pool should the status quo maintain.

The sector is believed to have contributed more than 5 000 to the unemployment circles this year alone.

The manufacturing sector has not been spared in this vicious cycle of impoverishment, cutting off an estimated 150 000 jobs since 2011 alone.

The problem of rising unemployment is a ticking time bomb which, if not urgently addressed is poised to bring about a myriad of social political and economic challenges.

Against this background, it is imperative that Government makes haste efforts to address the atrocities that continue to cancerously erode capacity in the country’s industry which is now just but a shadow of its former glory.