Formalising Zimbabwe’s informal economy- full statement and debate

2.2 Formalisation simply refers to formalising informal ventures in order for them to pay taxes and get licences (and pay the associated fees); a desirable outcome for the public purse. In fulfillment of the ZIM ASSET, the Ministry has embarked on one of its key result areas, which is the formalisation of the informal sector and the growth of SMEs up to large companies.

To do this, the Ministry has established a National Steering Committee comprising of all relevant ministries and agencies that have to do with licencing, taxation collection of levies, social security and the regulation of SMEs.

Consultative meetings were held in which the following deliverables were put forward:

• Expediting the crafting of the formalisation policy;
• Reducing costs of doing business in Zimbabwe; and
• Recognition and mentoring MSMEs with a potential for growth and contribution into the economy.

3.0 Advantages of Formalisation
3.1 A variety of advantages to be enjoyed in the formal sector could contribute to attracting informal enterprises to formalise and comply with business rules, laws and regulations in anticipation of accessing those benefits which they have previously forgone. The benefits that people forgo by being informal are being the reverse image of the benefits of being formal.

3.1.1 Reduced rate of corruption and embarrassment
The most widely appreciated benefit of running a formalised enterprises is that it gives business operators freedom from corruption, harassment and confiscation of property which the informal sector operators frequently experience, especially in the towns. This assessment of the susceptibility of informal enterprises to corruption and embarrassment is also widely noted in Zimbabwe.

3.1.2 Broadening of the tax base (potentially pertaining to lower tax rates).

3.1.3 Provision of higher quality, better paid and more sustainable jobs.

3.1.4 Reinforcement of the social contract between citizens and their State.

3.1.5 Strengthening of the reliability of agreements between firms.

3.1.6 Building investor confidence (increase investment), that is joint ventures and partnerships with SMEs. From the 24th to 28th March, 2014, the Ministry organised SME week which included a graduation ceremony for SMEs who have grown over the years from micro to small enterprises, from small to medium and medium to large companies. The identification process was done using the definition of MSMEs according to the SMEs Act basing on the annual turnover, number of employees and capital base excluding immovable assets.
Most of the identified candidates for graduation had at some point directly benefitted from support rolled out by the Ministry and development partners working with the Ministry. These graduands, Mr. Speaker Sir, came from five provinces. They came from Mashonaland Central, Mashonaland West, Mashonaland East, Manicaland and Harare.

The support includes loans, training, exhibitions and advisory services among other support. A total of 118 SMEs graduated, where 60 graduated from micro to small, 50 from small to medium and 8 from medium to large companies. A workshop was held during the graduation. ZIMRA, Registrar of Companies, the Ministry of Finance and Industry & Commerce also addressed the workshop. The sponsors of this event were EcoCash and Steward bank. The graduates brought their products for exhibition. We graduated mainly the SMEs that were in the productive sector because that is the basis for growing the economy. These covered leather and leather products, honey products, furniture, textiles, agriculture, food processing and building materials, just to mention a few.

The next graduation ceremony will be held in Bulawayo at the end of May, 2014. It will involve the five remaining provinces. Hon. members are encouraged to support SMEs in their areas towards these events. I thank you.

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