Lack of options is driving the informal sector

via Lack of options is driving the informal sector | SW Radio Africa 17 July 2014 by Nomalanga Moyo

Lack of options is driving thousands of Zimbabweans onto the streets where they are eking out a living as vendors, respected economist John Robertson has said.

With the rapid de-industrialisation in the country, Robertson said many people are either losing their jobs or failing to make it into the formal sector and this is forcing them to turn to the informal economy.

At least 80% of Zimbabweans are in the informal sector but, given the option, the majority would rather be in the documented, more secure formal sector.

“The informal sector is now so big that half of the country’s population now relies on it for survival. This is because the formal jobs in the business sector are now non-existent.

“This means that those who can’t find work have to find an activity for which they can get paid and this is what is driving the sector,” Robertson said on Thursday’s Big Picture programme.

Announcing this year’s national budget, Finance Minister Patrick Chinamasa also said the old formal economy is dead and the informal sector has taken over.

Harare-based correspondent Simon Muchemwa said evidence of this “death” is evident in the number of shops that close daily, only to be replaced by smaller shops or tuck-shops.

“Most of the retail shops or supermarkets that have closed have been subdivided into small cubicles for vendors selling anything from belts, clothing, or car parts.

“Along the streets and pavements of Harare city centre, the numbers of vendors has grown ten-fold since the economic crisis began. Recent college graduates, former professionals who have lost their jobs, and other ordinary Zimbabweans, all jostle daily to eke out a living selling just about anything you can think of, including tomatoes and vegetables.

“The competition is tough and many of those I spoke to say they do not earn much from this but at least they manage to feed themselves and their families,” Muchemwa added.

According to Robertson, most of the start-up capital for informal traders comes from relatives in the Diaspora, the idea being to buy and sell for the sake of keeping the families alive.

Billions of dollars are said to be circulating within the informal sector but because this is an unregulated area, government cannot tap into it to boost its dry coffers.

Unable to revive industries and provide jobs, government officials have taken to speaking glowingly of the informal sector in the context of economic recovery.

But Robertson repeated his recent remarks that the government has turned Zimbabwe into “a nation of traders and scavengers”, adding that the informal sector cannot provide the recovery that the country needs.

According to the economist, production is central to any meaningful economic activity and traders or vendors do not produce, but import most of their wares from countries such as South Africa.

“So whatever money is within the informal sector is not being used to fund any economic activity in the country. We used to have factories that were producing all the goods that informal traders buy and sell, but all that is gone now.

“The sector is keeping at least 5 million people alive and in that regard it is valuable but it is hard to argue that it has done the economy much good. The economic activity we want is that which leads to tax revenues or improved levels of formal employment, but that isn’t happening.”

He said Zimbabwe’s economy can recover, provided the Zim government changes its indigenisation laws to promote investor confidence.

“Investors need to be confident that if they build a factory they will be able to earn an income from their investment. We need them to kick-start industrial activities.

“At the moment the informal sector is as big as it is for lack of options. Nearly all the people operating in the informal sector would rather have a steady job that guarantees them a steady income and a payslip so they can be able to access loans.

“Government keeps on talking about the empowerment of young people but what they are failing to grasp is that the most empowering thing any young person can have is a job,” Robertson said.