Harare’s new economy! . . .

via Harare’s new economy! . . . Cranes missing from skyline but CBD’s shy-town thrives | The Herald July 14, 2014

The current economic climate characterised by a weak manufacturing sector, lack of cheap funding and low foreign direct investment has resulted in a burgeoning micro-enterprise economy in Zimbabwe’s major cities, a development that economists say shows how the environment has shifted into trading.
The proliferation of small enterprises, particularly in the retail sector, is also thriving on the demand profile of households with limited disposable income. Their needs for commodities such as clothing, food and motoring can appropriately be supplied by the informal sector in terms of affordability, type and quality.

Property companies acknowledge that cranes on Harare’s skyline could be a long way in coming back but are also cognisant of the rise of the trading economy which has caused an upsurge in construction activity in the CBD’s shy-town. Cranes on the skyline have long been viewed as an indicator of economic recovery. The last crane was for the Joina City building.

Finance Minister Patrick Chinamasa in his 2014 National Budget pointed out that the old formal economy was “dead” and a new one spurred by the informal sector was emerging.

A snap survey by The Herald Business last Friday showed that motor vehicle parts shops, hair products shops and fast foods restaurants headline the new phenomenon in the areas on the other side of Leopold Takawira Street going west. Retail occupancies for most property companies are currently above average.

Mobile phone and accessories sales shops have also mushroomed in the same areas, with informal dealers setting up “tables” on the pavements to attract customers. Clothing shops and flea markets have also dominated development in the areas.

For revenue authorities, the new businesses present a cash cow with the Zimbabwe Revenue Authorities intimating setting up formal markets to ensure that revenue collection is improved.

“What we need with respect to the informal sector is a paradigm shift, starting with the quantification of their economic contribution, which is undeniably significant. Researchers say that for every job created formally, a thousand crop up in the informal sector.

Similarly for every job lost, the informal sector gains. Significant as that is, authorities should nurture these enterprises, regularising revenue collection and the sector at large. Policy makers should recognise that despite advances in the retailing sector, some significant population partly or wholly depend on informal retailing as a means of sustenance,” markets analyst Miss Fiona Chigwida said.

The sight of old buildings in the Harare’s downtown area being gradually replaced by modern structures where retail business such as fast food outlets, supermarkets, clothing shops and night clubs has grown.

The use of a multi-currency system dominated by the greenback has made trade business in Zimbabwe attractive resulting in growing demand for retail space.

Current trends in the construction of buildings in the downtown area of Harare shows the shift from the old economic order which was denominated by spacious offices in the prime streets in the CBD to small shops and stalls in one mall.

Small business sector has spearheaded the growth of the new economic order.
The growth of the motor vehicles sales business is spurred on by the increase in the importation of second hand vehicles, mostly from Japan.
Some 62 000 second hand cars are imported annually compared with only 5 800 new cars imported in the 1980s. Statistics from the Industrial Development Corporation show that in 1997, the market would have 25 000 new cars, 18 000 of which were assembled locally.

For this reason, the IDC says Zimbabwe must make a strategic choice to make the motor sector an integral part of the industrialisation and employment creating strategy.

A new motor industry policy, which will address issues of importation, assembling and value addition, is being developed.
The current situation represents a highly differentiated scene with room for the growth of diverse enterprises for different markets.

“The hair, motor spares and fast foods trading continue to move volumes currently in the CBD. Most buildings have since been turned into retail outlets,” said one trader who requested anonymity.

Economic analyst Mr Joseph Sagwati said the sudden construction activity in the CBD is a sign of the rise of a new and strong economy.
“The evident expansive construction of new structures in the CBD describes the collapse of illegal trade and the collapse of the mainstream retail sector paving way for more organized set up. Policy and consumer choice will mean that the more diverse pattern that has arisen will continue to thrive,” he said.

In business the retail arm is the main driver for economic productivity as such its expansion leads to the boost of the construction segment of the economy. “Stunted growth in the retail sector results in weak construction demand and related downstream industries such as cement and steel manufacturing,” said Mr Sagwati.

Following the introduction of Zim Asset which recognises the role played by micro, small and medium enterprises in fostering sustainable economic recovery and empowerment of livelihoods the construction of business structure especially along Kaguvi Street where trade in motor spare parts has become the mainstay business.