MUTARE — Government has partnered with two consultants, Zimbisa and Prob Marketing to spearhead the formulation of a sound framework to formalise operations of small to medium enterprises (SMEs) so that they start contributing to the national fiscus.
Zimbisa is coordinating funding for the national exercise while Prob Marketing is heading research, in partnership with the Ministry of Small to Medium Enterprises.
This development comes as government’s revenue base continues to shrink due to increasing company closures.
A Fin Scope study on Zimbabwe, commissioned by the Ministry of SMEs and supported by the World Bank and other development partners, indicated that 84 percent of Zimbabweans were now informally employed and not contributing to Treasury despite controlling more than half of the economy.
The study further indicated that there were 5,7 million micro, small and medium enterprises with 2,9 million of their members, who constitute 57 percent, operating from households.
The informal economy constituted US$7,4 billion, the study pointed out.
Government, whose average, annual national budget is around US$4 billion, is only accessing less than two percent of the informal sector’s US$7,4 billion stake.
“The challenge with this is that if you want to grow your economy, you cannot grow an economy when you have the majority of your businesses operating from home. Because it means they have no capacity to produce at a larger scale,” said Zimbisa’s Gift Muganhu.
“The industry is worth US$7,4 billion, which is circulating, but not banked. Government is getting less than two percent. Government can get more if formalised,” he added.
Muganhu, an economist by profession, said it was imperative to make sure that government comes up with a proper framework to make sure that SMEs are encouraged to formalise.
He pointed out that formalisation does not end with registration alone, but covers a wide range of legal working aspects.
“Formalisation is broad; in terms of labour, you are able to have decent work place, minimum wages and genuine contracts; everything is legal…Look at the environment indigenous mechanics operates under.
“They operate in difficult circumstances under a tree, but if you give them proper space they can attract more clients. You can formalise again in respect of financial inclusion. Most of them are not financially included because they are outside the banking sector. If they are within they can access financial capital,” he added.
Muganhu said government needed to copy from other countries such as Bangladesh and India whose local authorities have played a central role in establishing zoning areas for informal businesses.
These were similar to the Glen View carpentry centre.
He said such centres could be constructed under the Build to Transfer or Private Public Partnerships.
The ministry is also reviewing the policy framework governing cooperatives with the assistance of the two consultancy firms.
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