Online Reporter
Nelson Munyaradzi Sango
Herald Correspondent
Zimbabwe’s economy has been historically structured in a dual manner where there has always been a distinct dissection between the formal and the informal economies.
The main economic sectors during the colonial era, industrial, mining, commercial, and agriculture were dominated by multi-national companies whose headquarters were mostly in the United States of America, Britain and South Africa.
Control of large corporations with various branches across continents took the form of extended bureaucracy to ensure predetermined, direct and swift hierarchical reporting structures.
Bureaucratic management structures are known to centralise authority. It has to be noted that at a certain time in the colonial period, the country was host to a number of company sub-headquarters in the Federal Government, now comprising the post-colonial territories of Zimbabwe, Zambia and Malawi between 1957 and 1964.
Companies like Lonrho, Anglo America, Cairns, and Dalgety, among others, who had investment interests across the federation and even in other African countries, administrated from Salisbury, Southern Rhodesia.
This preceded a rapid development of systems synonymous to those in the companies’ host colonising countries.
Though trailing in terms of sophistication compared to host western headquartered countries, the local system was being developed to follow similar administration forms and legal systems.
In the earliest years of colonisation, around 1890, the Rhodesian commercial control mechanisms were much vested within an individual authority, the British South Africa Company, which doubled as the dominant investment control vehicle for settlers and the governing authority.
However, the emergence of an elected political system in 1923, halted the monopoly of the BSAC as the proliferation of alternative private investors, like those mentioned above meant that this had to change.
The government, precisely the political system, now retained the preponderant role in terms of control and coordination. Essentially, companies had to register and contribute to the treasury through complying with statutory payments as required by law.
These were the rudimentary formalisation processes in the country. To implement this, setting up of relevant institutional infrastructures was inevitable. Tax and company registry authorities were subsequently set up.
Social security, though catering for only the few elites, predominantly whites, hardly regarded as critical to the majority of black employees in relation to the colonial background of the country, also began to loosely emerge. A relevant authority, the Prevention of Accidents and Workers Compensation was established in the late 1950s
Towards 1980, the large mining, industrial and commercial sectors had become highly formalised as they were recipients of deliberate fiscal assistance in the form of both non-financial and financial subsidies from the colonial central government.
They also enjoyed greater access to concessionary loan capital channelled by the same government.
This meant rapid growth of these sectors, which were also major revenue and national gross product contributors. Formalisation was now being increasingly seen as a way of fostering interaction between the Government and economic units, whose number had grown substantially.
To stay in touch, the post-independence people’s government had to increase its institutional control related to these sectors, agriculture, mining, manufacturing industry, banking, and insurance.
This explains why the period experienced increased strengthening and emergence of more regulatory Government agencies with interest to the aforementioned sector players.
This is also why they are the most formalised to this day.
Reforms were made and formation of new institutions took place. Major examples in relation to this particular discourse would include major reforms to the Customs and Tax Authority, now Zimbabwe Revenue Authority, National Social Security Authority (in the 1990s), Registrar of Companies, greater focus on the Zimbabwe Stock Exchange, among others.
All these were meant to control the unchecked opulences of the formal industrial and commercial sectors. There was a need to regulate natural, economic and human resources, creating a fair rewarding system, exploitation, and also importantly, to improve and solidify revenue collection mechanisms for the state and benefit of citizens.
However, the colonial period was characterized with deliberate disregard of the rural economy despite the fact that there were both agricultural and off farm economic activities taking place there. These economic activities were largely regarded as subsistent with no greater role to the national economy, though the notion may not be absolutely true.
Similarly, as the country became industrialised, an increased black population migrated to the urban areas and mining towns seeking employment, subsequently leading to the emergence and growth of trading and petty service enterprises by black entrepreneurs.
Mostly, as hawkers and street vendors, they served their employed black compatriots, who had a formal source of income.
Most visionary of these entrepreneurs began to set up shop in the sprawling locations they stayed, and even back in their own rural areas.
This emerging urban economic component and the earlier mentioned rural economy operated without Government recognition.
Regulations were regarded as only important to restrain filthiness, commotion and damaging of environmental aesthetically. They grew randomly, unsystematically, and were associated with rebuke both by the settler system and the black community.
Vendors, handcrafters, welders, and carpenters were often viewed as failures who would have been unable to secure employment in the lucrative formal system of the educated.
The colonial central government hardly had a coordinated system that collected revenue from these. This residual duty was relegated to loosely instituted local authorities to hustle revenue for survival from these informal economy operators. This was also often done in a haphazard, disorganised, unsystematic and indiscriminate manner.
Regarding provision of decent work status to the informal sector through properly sheltering them, creating friendly by-laws, and providing formal sector financing, efforts have been taken since 1980, for example, formation of the Small Enterprises Development Corporation (SEDCO).
However, eradication of the earlier mentioned stigma towards the informal sector has hardly been easily achieved until today. This is regardless of commendable policy efforts to reverse this anomaly. Covert counter resentment activities against the formal sector systems by informal sector operators had to be contended.
Informal sector players view everything affiliated to Government agencies with momentous suspicion. ZIMRA and local authorities are viewed as throat suckers determined to wipe off all their earnings, not earnest Government revenue collectors, who take a limited predetermined amount of business revenue for economic development critical to the country.
Bank loans are considered baits to locate one with ZIMRA and local authorities, not a mechanism of financial inclusion required by SMEs to spur growth and place them in the mainstream economy.
All other Government agencies, who issue permits and licenses are dismissed with the same skeptical view, and all their positive intentions are disregarded at face value.
However, this is further compounded by some regulations, duties and responsibilities expected by some authorities and agencies that blanket informal sector players with their larger counterparts in the industrial and commercial sectors.
Sometimes these are not calibrated according to the level and consistency, as some, especially informal, are periodic and sporadic, of earnings of a particular business sector level.
A concerted multi-sectoral strategy needs to be developed to coincide these repelling perceptions between the informal sector and the formal sector, so as to consolidate their efforts into some congruent and concrete economic development outcomes.
This discourse suggests sharing of relevant information between the sectors as the initial casting stone to this extended challenge.
Proper communication is critical to disperse wrong perceptions. Mending of systems and aligning of regulations can only be a support mechanism subordinate to disbursement of correct information and building of a strong knowledge base, especially to informal sector players.
However, the formal business sector, particularly supermarkets, wholesalers, and clothing outlets, are also devoid of the ability to comprehend how informal sector players are indispensable swift conductors of business lines of communication in the aggregate economy, though they need to operate within legal limits.
Thus, the formal sector also needs to be provided with knowledge of the importance of smart and clean partnerships with the informal sector.
No one starts by registering. No one was born with a birth certificate, besides his or her mothers’ maternity bed. It is a process, a tenuous one in business. And, those, at least with an entrepreneurial vision that supports the economy, deserve support, as Desmond Tutu puts it, “My humanity is bound in yours, we can only be human together”.
However, staying informalised has precluded this sector from getting fruitful business contracts, participating in critical information research programmes by the Research Council of Zimbabwe and other researchers, aligning themselves with important principles of corporate governance, among other potential benefits.
They are constantly sidelined from larger and more profitable markets. Because they lack certain certifications and modern market requirements, they have minimal appreciation of the importance of technology related issues, like barcoding.
These challenges have exacerbated the gap between the large-scale and formalised sectors in terms of growth and wealth creation, which has continued to widen as they move in opposite directions.
The former consolidating various benefits of being formalised and getting more advanced and wealthier, and the latter remaining stagnant, using primitive business methods and unable to fully exploit their wealth creation potential.
In the previous two decades, the informal economy reacted to these perceived injustices through applying a paraphernalia of unorthodox business tactics, which has threatened to push the aggregate national economy into a jungle economy.
It is unfortunate that the most daring unscrupulous elements within the informal sector have begun to devise subtle criminal methods to survive in the economic boxing ring through evading legitimate operating regulations.
Feeling the strain, some formal economic players have adopted the “if you can’t beat them join them or use them” approach reaching to an extent where the formal economic system itself has become diluted. Elements and practices that define the informal system becoming normalised in the formal sector.
The effects are compounded and severely damaging, including opening up pathways for untraceable fraudulent activities, poor service delivery, erosion of corporate governance and best standards of business practices.
Such collusion has undoubtedly become the seedbed of mass-scale levels of smuggling, production and supply of harmful alcoholic and non-alcoholic beverages and foodstuffs. Acute consequences include, but are not limited to loss of fiscal revenue and compromises of human safety. Yet, most tragically to current and future generations, the massive proliferation of drug and substance abuse, especially by young people.
However, it is commendable that the Government has remained resilient and committed to addressing and implementing relevant policies to quell these imminent menacing, and potentially marauding social threats. There is always a reason to believe that there is bright light ahead of the tunnel.
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