Informal sector panacea to unemployment

Government should ensure the SMEs sector contributes to the fiscus through tax. This file photo shows different types of sofas, as furniture-making has become a lucrative business

Government should ensure the SMEs sector contributes to the fiscus through tax. This file photo shows different types of sofas, as furniture-making has become a lucrative business

Susan Chipanga Correspondent
“Adapt or perish”; the saying by British author HG Wells is more applicable now in the socio-economic-political environment that characterises our beloved Zimbabwe. Zimbabweans have been more resilient, finding innovative ways to survive under the biting effects of the illegal sanctions imposed by the West.

One area that has cushioned Zimbabwe has been the informal sector. Gone are the days when the informal economy was viewed as an outdated relic of under-development destined to be replaced by regular paid jobs. In spite of the gross neglect of the informal sector by policy-makers, this sector of the economy has shown resilience and strong dynamism during the country’s economic downturn experienced in the past decade and more.

The sector was traditionally known for absorbing the low-level qualification holders and rural-urban drift population, but the tide has turned and it’s now time to seriously promote this sector as the source of employment for the growing number of graduates roaming the streets.

No longer can we afford to think that all people who engage in informal sector activities are poor or that the sector is disorganised and unstructured or that informal sector activities are illegal.

Talk of employment in the formal sector due the economic malaise is ludicrous as it is improbable. Each year we are confronted by disquieting news of a number of companies closing shop to the dismay of many job-seeking graduates.

In 2014 alone close to 7 000 workers are estimated to have lost their jobs when at least 52 companies closed. This gloomy picture is further compounded by reports of at least 35 companies being placed under judicial management or liquidation in the same year.

This unsettling news is against a backdrop of nearly 10 000 graduates churned out by the country’s universities, according to enrolment statistics obtained from Zimbabwe National Statistics Agency (Zimstat).

It is even more disconcerting that a small fraction of the graduates are absorbed in the formal sector and the rest are left to roam the streets. A recent true story showed how disquieting the situation has become.

A local supermarket that sells farm produce advertised seeking people to fill in various vacant posts of its newly-opened branch. Unfortunately, this advert was flighted on social media and the thousands of respondents to the advert were scandalous.

The number of graduates who turned up for posts like till operators, cleaners was pitiful. But that is the reality that confronts us as a nation.

We cannot continue to rest on our laurels and expect things to have worked out as if by magic. Finance Minister Patrick Chinamasa at a Mandel-Gibbs Economic Symposium in 2014 was quoted saying, “Let us not have the belief that things and events can happen effortlessly, that you can move mountains . . .”

It’s time for Zimbabweans to be innovative and creative in a bid to build their future and leave a legacy for future generations.

Our starting point should be the revisiting of the 1999 Nziramasanga Commission of Inquiry report which proposed, among other things, the adoption of the four pathways of education, namely academic, business, technology and vocational.

The Commission, which was set up in 1999 to evaluate Zimbabwe’s educational requirements, observed that the national curriculum was inclined towards academics.

Hence, it recommended the introduction of vocational skills training in secondary schools. Because skills for the knowledge economy are built at the tertiary education level, improving tertiary education systems should be high on the Government’s development priorities.

It’s high time that our education system responded to the current social, economic and political environment which requires graduates to acquire skills that aid them to be self-employed.

The Nziramasanga report prophetically saw the challenges that the country was going to face if we continued along that path, as many unemployed graduates are living testimony of that nightmare envisioned some 16 years ago.

The Nziramasanga Commission’s recommendations would have fit like a glove with the country’s indigenisation and empowerment drive and achieved economic emancipation, which has eluded the country since the 1980 political independence.

It’s also time to harness the informal sector, which has grown to unimaginable proportions in the last few years and Finance Minister, Cde Chinamasa, acknowledged there were more economically active people in the informal sector than those in the formal sector.

The informal sector has grown in the last few years and has been a vital sponge to help people survive after losing their jobs.

Hence, many have seen this as a temporary measure until they could get formal employment — a notion which we should eradicate forthwith.

The World Bank country economist Ms Nadia Piffaretti noted that it was high time Government paid more attention to the massive informal sector, which was now at 46 percent compared to South Africa (17 percent) and Malawi (13 percent). The importance of the sector in present Zimbabwe cannot be overemphasised as the statistics given by the Minister of Small and Medium Enterprises and Co-operative Development, Cde Sithembiso Nyoni, who said that in 2012, 5,7 million jobs were created from 2,8 million small businesses, while 800 000 small businesses employed 2,9 million people, speak for themselves.

At a time when Government is struggling to source funds for the fiscus, the sector is awash with funds which the SMEs Minister Cde Nyoni estimated to be $7 billion. Cde Chinamasa bemoaned the sector’s non-contribution to the national treasury when he noted that the sector was not adding value to the fiscus.

Hence, there is need to formalise the informal sector, which Cde Nyoni said entails registering, licensing of their economic activities, ensuring they have addresses, registering them as private limited companies and sole traders or partnerships.

This also entails stamping out bureaucratic hurdles in the registration process of businesses, which has seen many informal businesses reluctant to formalise their operations.

The sector should also be structured in line with the rules and regulations of the country to avoid the chaos that has been created in the streets of major cities, negating the potential of the sector’s contribution to the economy. The sector can contribute massively to the economy.

The Africa Development Bank (Afdb) noted that the informal sector contributes about 55 percent of Sub-Saharan Africa’s GDP and 80 percent of the labour force.

The sector has contributed immensely to GDP whereby more goods are availed to the market through increased production, aiding significant contribution to the economy.

The Zimbabwe Revenue Authority (ZIMRA) has seen the significance of this sector, hence its massive drive to get the informal sector presumptive taxes. We need to follow the route taken by Ghana, which is one of the few countries that have pursued a sustained and systematic effort in taxing the informal sector through innovative presumptive taxation methods.

The recent unveiled graduate fund by the Minister of Higher Education and Tertiary Education, Science and Technology Cde Oppah Muchinguri would not have come at a better time in assisting unemployed graduates to become self-employed.

Reports are that Government has set aside $670 000 from the Zimbabwe Manpower Development Fund (ZIMDEF) to fund projects for unemployed graduates, teaching them to be self-reliant and innovative.

The programme, which Minister Muchinguri said was borne out of “President Mugabe noting that the number of unemployed graduates on our streets was increasing” will cascade to all provinces.

This noble gesture will go a long way in generating employment for the unemployed graduates and fulfil the Zim-Asset target of achieving 2,2million jobs by year 2018.

Pin It