Informal sector gives millions respite

Source: Informal sector gives millions respite | The Financial Gazette January 25, 2018

By Shame Makoshori, Senior Business Reporter

ZIMBABWE’s informal sector, which has an estimated 5,7 million players, has lifted a significant number of people out of economic difficulties, a recent survey has indicated.

The survey, which was carried out by the Zimbabwe National Chamber of Commerce (ZNCC) at the end of last year, said 25 percent of informal sector entities — typically family-run — earned double the $501 that an average household requires per month for basic commodities. The survey titled “Dynamics and Characteristics of the Informal Sector in Zimbabwe” and it polled 340 informal sector operators countrywide.

However, it revealed that there were still pockets of people in the sector that are toiling in abject poverty. Manufacturing related informal business activities and the retail sector were some of the best income generators for the industry, according to ZNCC. “The highest number of informal sector players falls in the highest revenue category, as about 25 percent of the interviewed informal sector business units generate revenue of more than $1 200 every month,” ZNCC said. “This is followed by about 20 percent that earn between $200 and $400 per month.

About 13 percent of the players generate revenues which do not exceed $200 per month, while about 33 percent of informal sector players generate revenues which do not exceed $400 per month. “Thus, due to the multiplicity of business units doing similar activities, the revenues per business unit have been eroded, even though this is still more than enough to support the largely single person units,” said the report. “Using the average revenue for all the interviewed players, the informal sector business units generate at least $680 per month.

“However, (the fact that) informal sector players’ revenues have a distribution that is negatively skewed, underline the fact that there are many players that earn more than the average,” ZNCC added. Government has embarked on a campaign to encourage many people who have lost jobs during an economic crisis to establish their own businesses.

The economic crisis started in 2000, and has been deteriorating in the past year. The programme is largely undermined by lack of capital, as well as being undermined by lack of training and other logistics. “The majority of the informal sector players (about 57 percent) have monthly expenses which are about $150 and below, while the average monthly expenses for all the players interviewed is about $317. “This means that the average profit for all the players would be at least $364 net of expenses.

Official statistics from the Zimbabwe National Statistics Agency show that the total consumption poverty line for an average of five persons per household stood at $501 in June 2017. Using the average profit of $364 and assuming that the business owners have a family of five to feed, then the profits enjoyed would generally be below the poverty datum line, just like a number of those in the formal sector,” said ZNCC.