Zim stuck with 1980 economic model

6
4111
Jesimen Chipika,

Zimbabwe’s economy is still using the same model that was there at independence characterised by low participation from the informal sector, central bank deputy governor Jesimen Chipika has said.

BY TATIRA ZWINOIRA

Speaking at the launch of the International Monetary Fund’s Regional Economic Outlook for Sub-Saharan Africa 2017 on Monday, Chipika said sub-Saharan African countries, Zimbabwe included, have not changed models of their economies.

“We are still running the economies that we inherited at independence, enclave economies, economies where a few are participating. The majority of our populations are not in the economy or they are marginalised. I would have thought that part of what is constraining growth in sub-Saharan Africa and really in Zimbabwe is really that factor,” she said.

“Going forward, we want to run inclusive economies and we are making all sorts of efforts from all angles.”

The informal sector is estimated to be generating $7 billion which is about half the revenue, generated from the economy reported by the Zimbabwe Revenue Authority (Zimra), making it about 60% of the gross domestic product.

In terms of employment, the informal sector employs about 5,7 million, compared to the formal sector’s 500 000.

Economists say formalising the informal sector would see Zimra getting more revenue, instead of from the punitive presumptive taxes they are getting from a small fraction of informal traders.

Presumptive taxes are only on persons “in receipt of rental income from an informal trader in respect of residential accommodation, premises or a place on which trade is carried on are required to recover an additional amount by way of presumptive tax equal to 10% of the rental and remit it to Zimra. This also includes local authorities”.

Economist and consultant to the Office of the President and Cabinet Ashok Chakravarti said that the informal sector necessitated a national informal sector policy.

“We need to have a national informal sector policy which has all these aspects of removing regulatory barriers, financial inclusion and it should be at the same level of an export diversification policy. That is the only way we can develop the informal sector, make it grow, make it part of the economy, contribute to the tax base eventually,” he said.

RBZ governor John Mangudya said the formalisation of the informal sector could expand the economic base and generate more revenue for the economy.

6 COMMENTS

  1. yes madam deputy boss and you did not finish, we are also still stuck with 1980 President and there will need to be changed altogether same time whenever the time comes.

  2. African countries particularly Zimbabwe need to understand what they proffer as solutions to current economic problems. The informal sector’s activities cannot be quantified because those activities are not known and therefore not measurable.By definition informal business are those that are not part of the government accounting system and operate outside the law. There is confusion between Micro, Small and Medium Enterprises(MSMEs) and the informal sector. But even the MSMEs cannot support the economy. The $7 billion reference is from a 2012 Finscope reprot which is a dangerous piece of evidence.That is the report which gave Zimbabwe’s unemployment rate as 11% arguing that anyone involved in some sort of subsistence activity is employed against the known economic definition of employment. There is absolutely no relationship between the figures in that report and reality on the ground. The notion that there is $7 billion in the informal sector is a pure fallacy. However policies like indiginisation and the RSA, BEE are mechanisms meant to reverse the past economic participation imbalances. Those mechanisms however need to be supported by funding and other support structures. Big businesses remain the panacea to solving economic woes because of their large consumptive patterns and down stream effects. Those familiar with the US economy will attest to the fact that more than 99% of American businesses are MSMEs but the less than 1% contributes more than 52% of GDP. That is an important statistic which Africa must understand and use to determine their investment pr

  3. In my comments to then finance minister Patrick ChinanamasaI repeatedly tried to explain to the esteemed gentleman that instead of the proverbial “Government has no money” mantra he should devise means to tax the informal sector. Paying tax is a mandatory citizen obligation. I even mentioned that in the United States the IRS (Internal Revenue Service,the equivalent to our ZIMRA was more feared than the FBI. You pay tax or go to jail.But who islistening??

    • @ Jonho – The irony of it is that the so-called informal sector in the Zim context are essentially subsistence players who do not fall into the tax bracket according to our laws.They do not make profit and do not pay wages above the minimum threshold thereby falling outside the tax bracket. I have already highlighted that informal businesses by definition are not part of the government accounting system. They should however be encouraged to graduate to the formal sector through incentives and incubation periods. The current problem is that we focus more on taxation instead of growing these businesses. Even if they did not contribute directly through cooperate sector a sizeable informal sector will contribute to the fiscus through indirect taxes such as VAT.

      • Comment…firstly the house need to be cleaned you can’t implement change on a dirty house ( corrupt officials )

Comments are closed.