FORMALISATION has arguably become one of most dominant centres of conversation to the general Zimbabwean populace, but in particular to those with differing interests in the various economic processes of the country.
His Excellency, President Mnangagwa has alluded on various occasions that Zimbabweans are a hardworking lot, thriving earnestly to earn an honest living.
This can never be overemphasised, considering a plethora of bustling, hustling entrepreneurial activities in the country’s urban and rural informal economies.
However, the same executive authority and other critical business support agencies have decried the acute lack of clear business operating standards and structures in the informal sector which has increasingly become the spinal of the country’s economic body.
Regrettably, the concept can only be lucidly understood by the academia and office bearers in the business world, yet remains a sophisticated parable to vendors, traders, cross borders and artisans who are actively involved in the country’s economic fabric.
Hardly do they clearly understand the term formalisation itself, nor its processes, let alone its benefits and contribution to the sustainability and growth of their sweated and irked entrepreneurial efforts.
Formalisation refers to the process whereby a business entity acquires registration papers from local authorities and or other relevant Government agencies, so that it can operate legally, and also comply to stipulated regulations.
Two analogies can be given for more clarification to economic stakeholders, especially those in the informal sector.
It is like a citizen acquiring a national ID card, without which, one does not have identity and is permanently barricaded from all Government activities like voting, entering school or attaining a formal job.
Turning to our tradition, it is like the paying of a token of lobola by the groom to the bride’s family (kuroora).
Without this formality, that union is not recognised as a marriage and no relationship is considered as existent among the two families (kubika mapoto).
In the event of trouble, none of the senior family members are accountable to assist.
This is how business formalisation is important to all players in the economic field.
To this end, it has become imperative to mobilise tangible, non-lip service support from all stakeholders across the social, political and economic fronts to avoid making this critical economic force a flirting illusion to be pursued, but never attained.
Without doubt, it is incumbent upon the all, be it political leaders, community leaders, economists and operatives (entrepreneurs), civic society and the general populace, not only to understand, but also to collectively and vigorously coalesce towards ensuring that formalisation becomes a functional success.
Lack of formalisation is a heavy burden on the prospects of attaining a progressive, coordinated and performing economy.
In his recent monetary policy, Reserve Bank Governor, Dr John Mushayavanhu, bemoaned lack or existence of weak structures and systems that can support a vibrant formal economy.
He actually suggested policy interventions which include promoting Point of Sale systems, Electronic payments and incentivised these by erasing charges on transactions below US$5.
The intention is to mop up liquid cash away from sources where it is idle and channel it towards sectors that are productive and can support the real economy.
As the formal industry and tertiary economies produce economic fruits, down chain benefits that accrue to both formal and non-formal micro-small and medium enterprises are immense.
For instance, high productivity in the formal manufacturing industry increases supply of products which are raw materials to the SME sector.
This lowers direct production or trade purchasing costs to their businesses, concomitantly widening profit margins.
A viable commercial sector is a source of cheaper, less conditioned and concessionary source of credit lines.
Also as the fiscus’ budget inclines towards being balanced or surplus, funds become available to finance business support infrastructures.
It is not worth mentioning how this will cut on micro, small and medium enterprises overheads and likewise also leapfrogs profit margins.
Benefits that accrue to the informal sector through formalisation are infinite.
These include, but are not limited to easy access to Government and the private sector financial support, access to supply and market information, limited liabity, access to public infrastructure and services, access to systems of social security.
Vendors begin to access secure vending sites, tailor-made terms capital on fair terms, freedom from harassment, evictions, confiscations and bribes, licences to sell and identity cards, positive public image, as also alluded to by Webo Working Papers.
Though there may be limitations to formalisation, like entering into a bureaucratic web of a system that may present challenges of rigid and pace lowering regulations, benefits far outweigh disadvantages.
During the 2025 Cabinet Year Address by President Mnangagwa, Confederation of Zimbabwe Retailers president, Mr Denford Mutashu, stridently cried out against the unfair competition and the odiferous advantages the informal sector enjoys against the big boys in the formal sector.
Chiefly, he noted their evasion of statutory payments, lowering their operating costs, hence affording them a fore on price competition.
Additionally, this sector also enjoys illegal cost cutting activities like smuggling, sprouting at undesignated but strategic vending sites, cajoling of potential clients, all costing the formal sector an arm and a leg.
It is therefore imperative upon the formal sector to begin desisting resentment of the informal sector.
This will only serve to create rebound resentment attitude from the informal sector small, but multi-tricky boys in the economy.
Instead of catalyzing running battles between the smaller sector and local authorities and other Government regulative enforcing agencies, it is wiser to co-opt them as brothers and future critical business partners.
Methods and stratagem needs to be contrived to create a passage that will gradually absorb the informal sector into the legit, coordinated, supervisable and fiscally beneficial formal economy.
This is only possible through collective efforts from all politico-social economic sectors.
The worst barrier to any form of bargain is negative perception.
This is the end result of fueling enemity between government agencies and the informal sector.
A cat and mouse relationship is born, nurtured and enigmatic to curtail.
Statement awash the formal and social media to the effect that equates informal sector to economic rogues needs to be seriously checked, if co-operation with them is ever being fathomed.
Serious consideration has to be placed on educating, informing and pacifying relations between private sector players, government law enforcing agencies and the informal sector.
Through crucial departments like Ministry of Women’s Affairs, Community, Small and Medium Enterprises, such fruitful interventions can curve out progressive outcomes with mutual benefits to the formal sector, informal sector, government, the aggregate economy and hence the general economy.
Such a ministry, playing a unifier role can be a conduit to educate, both the informal and formal sectors on the importance of formalisation to the former, and the consequences of hostilities to the later.
Platforms of constructive engagements can also be created between Micro-Small and Medium Enterprises Representatives like the National Chamber of SMEs and Corporate World representatives like Confederation of Zimbabwe Industries, Confederation of Zimbabwe Retailers, Bankers Association of Zimbabwe etc, and also Government agencies like local authorities, ZIMRA, SAZ etc.
These engagements are critical to clarify standpoints, exchange institutional roles and information and hence clear perception.
Perception clearing is indispensable for peace and confidence building as partners move towards creating, repairing and advancing progressive and durable mutual benefiting relationships.
Well thought and subtly crafted hardware policies like monetary and fiscal policies like the monetary and the fiscus are cockpits of the economy, but success maybe remote when they are bereft of software cross cutting anchors like formalisation. Such are like the spirit that soothes and keeps an active economic body unbroken
Nelson Munyaradzi Sango works as an Economist with the Government of Zimbabwe. He writes in his own capacity. He can be contacted on 0773993508 or email: nelsonmsango@gmail.com.
