Informal Sector Dialogue Meetings Synthesised Report for 2015

1. Background

Zimbabwe, like other African countries, has experienced a huge seismic shift from the formal to the informal sector as necessitated by increasing company closures and massive job losses across the country. The economy rapidly deteriorated in the 1990s following implementation of Multilateral Financial Institutions (IMF and World Bank) driven structural adjustment policies. Economic deterioration was worsened by the implementation of a Land Reform Programme officially launched in 2002. In 2009, the economy descended on an ailing economic recovery phase characterised by dwindling industrial capacity utilization, huge external debt, deflation and company closures cumulatively increasing household poverty. Massive production of graduates and other school leavers in a jobless economy imply school leavers cannot get gainful employment in the formal sector; hence they join the ranks of the unemployed - later forced into informal activity. Rural to urban migration driven by anticipation of urban employment and risk-ridden agricultural production being threatened by climate change has contributed to rapid growth of the informal sector. In an effort to earn a living, the unemployed and their siblings have resorted to informal activities in retailing, manufacturing, mining and transport. Wholesale vending is the outstanding informal activity in the central business districts of urban centres violating council by-laws; a development that has alarmed both the government and the urban authorities. The informal sector in Zimbabwe has become a force to reckon with and is now the basic and easy way to earn a living in an economy deficient of formal jobs.

2. Magnitude of Informalisation

Evidence suggests that the informal sector has grown from less than 10% in 1980 to 27% in 1991 and 60% in 2012 (LEDRIZ, 2015; Mugano, 2015). A Gemini study (1991) found about 845 000 informal enterprises in the country employing a total of 1.6 million people. In 2013, FinScope found 2.8 million micro, small and medium businesses operating in Zimbabwe (85 percent being unregistered) employing 5.7 million informal jobs. These businesses generate an estimated turnover of 7.4 billion US dollars, according to the FinScope survey. In 2014, 94% of the employed people aged 15 years and above and 98% of the youths aged 15-24 years were found to be informally employed. Informal employment became the new social base as people undertake diverse activities in communal agriculture, trade and commerce, manufacturing, mining, education and transport as primary sources of income. Informal employment has further increased between 2014 and 2015 as the economy slowed down from growth of 3% in 2014 to an estimated 1.5% in 2015. Massive company closures that occurred between 2011 and 2015 increased the extent of informalization. Informal employment increased by about 29% between 2011 and 2014 when the formal employment is believed to have shrunk by 40% as an annual average of 35 400 people were retrenched in the seven years to 2011 while an average of 75 600 people were retrenched between 2011 and 2014 (The Economist, 2015). Between 2011 and 2014, 4 610 companies closed down affecting 55 443 workers, their dependence and the surrounding communities (G.O.Z, 2014 - 2015 National Budget). In 2015, about 20 000 workers were fired between July 17 and August 22 following a Supreme court ruling that allowed employers to fire workers on three months’ notice. The remaining employed workers (about 87.5%) earn below the consumption poverty datum line, forcing them to undertake secondary activities to supplement income. Zimbabwe’s informal sector is proportionately large and expanding at a very rapid rate as retrenchments mounts and formal employment slides while the supply of labour firms. The obtaining situation paints a gloomy future that is characterised by deteriorating socioeconomic and political climate as the informal sector is fast becoming the new political battleground. The structural shift has been recognised by the government. The Minister of Finance during a Parliamentary question time confirmed as much in February 2014, “Our economy is now informal…That is the reality of our economy and it is a reality we must recognise and take measures on how to tap into this sector.” This is due to the wholesale closure of manufacturing companies, the entrance of school leavers onto the job market and the traditional rural-urban migration. Informal sector, particularly street vending, becomes the source of livelihood for the aforementioned social groups.

3. Authorities’ response

The city fathers have been alarmed by the ballooning informal vending that has uncontrollably mushroomed in the central business district, inconveniencing the public and formal business outlets. Vegetables and imported Chinese wares are being sold on the pavements and in the process violating council by-laws. The response of the authorities has been to unleash the law enforcement agents on them. However, the success of such measures has been short-lived because the next day or after working hours the vendors and traders will be back on the streets. The designated areas for vending have been condemned by the vendors as not strategic because they are far away from their clients. One of the fundamental reasons for the failure of the authorities measures is that the decisions are unilateral, done without the involvement of the informal vendors. Forced removal of vendors from the streets without understanding their circumstances is likely to induce theft, robberies, prostitution, etc in an effort to earn a living. The government has also hinted on formalising the informal sector for the purposes of broadening the tax base. Minister of Finance indicated that there is urgent need to formalise the dominant informal sector to broaden government revenue, “... there has been a structural shift to informal economy- the larger economy presides in the informal sector and this cannot be ignored. More money is flowing in the informal sector than the formal sector but the informal sector is difficult to tax.” Government’s strategy is biased towards taxing the informal sector rather than protecting and promoting the sector through decent infrastructure and social services, and requisite legislation. The approach

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