Formalising Zimbabwe’s informal economy- full statement and debate

MINISTERIAL STATEMENT

FORMALISATION OF THE INFORMAL SECTOR

THE MINISTER OF SMALL AND MEDIUM ENTERPRISES AND COOPERATIVE DEVELOPMENT (MRS. NYONI): Following the introduction of ZIM ASSET which clearly recognises the role played by micro, small and medium enterprises (MSMEs) in fostering sustainable economic recovery and empowerment of livelihoods, it becomes apparently clear that a deliberate action needs to be taken to bring on board the operations of these small businesses such that their contribution to the fiscus can be easily recognised. The 2014 Fiscal Policy recognises the "death of the old economy and the rise of a new economic order spearheaded by the growth of small business sector and indigenisation"

The MSMEs are key players in economic development and empowerment. According to the FINSCOPE MSMEs Survey Zimbabwe 2012, a total of 5.7 million jobs were created within the MSME sector and that there are 2.8 million small business owners of 3.5million of small businesses. 800 000 of the small business owners employ 2.9 million people (excluding the business owners themselves). The statistics indicate that the majority, which is 72% of the owners do not employ anyone and only 28% which translates to 800 000 owners employ 2.9 million people.

The FINSCOPE report also depicts that 85% of MSMEs are informal and almost US$7.4bn is circulating in this sector. Just imagine that if 2.8 million people were to pay US$1 per month, that would greatly contribute to our fiscus. The informal sector comprises of the unregistered and unregulated enterprises whose owner and operator chooses to avoid registration and thereby taxation.

The informal economy has not only grown in many countries but has emerged in new forms and unexpected places. The aim of the Ministry is to spearhead the formalisation agenda and create an enabling environment which will facilitate the development and growth of sustainable SMEs and co-operatives.

2.0 Definition of Formalisation

2.1 Formalisation means registration and licencing of an economic activity under the laws and regulations of the land that a business is operating from. The process of registering and licencing involves:

• Registering a form of business as a private limited company, private business corporation, co-operative, sole trader or partnership;
• Registering with tax authorities;
• Have local authorities' licences; and
• Registering with NSSA and Manpower Development Fund, et cetera.

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