Government Cracks Down on Manufacturers Supplying Informal Sector

Spread the love

Harare, Zimbabwe — The Government has issued a strong warning to manufacturers supplying goods directly to the informal sector, citing the practice as a major contributor to market distortions and the undermining of formal businesses.

The move follows an emergency meeting chaired by President Emmerson Mnangagwa, who cut short his annual leave to address pressing economic challenges.

Finance, Economic Development, and Investment Promotion Minister Professor Mthuli Ncube emphasized the need for manufacturers to cease bypassing wholesalers and distributing goods directly to informal retailers.

“I want to discourage suppliers from supplying directly to the informal sector, circumventing the wholesalers and formal retail sector,” Prof Ncube said in an interview with the Bulawayo Bureau. “We are insisting on a 5 percent withholding tax as the charge for those who are not compliant with the tax requirements.”

The Minister outlined a series of interventions aimed at creating a level playing field for formal businesses, which have long struggled to compete with unregulated informal traders. He highlighted the excessive informalisation of the retail sector as a significant disadvantage for formal businesses, which must adhere to regulatory requirements and statutory obligations.

“The formal sector is unable to compete successfully given some of the regulatory burdens they face,” Prof Ncube explained. “So, the statement I issued on Friday has to do with how we can deepen formalisation of the economy, making sure that anyone operating in the sector is appropriately licensed.”

Key Measures to Formalise the Economy

As part of its efforts to formalise the economy, the Government has mandated that all businesses operating in the retail sector obtain the necessary licences. This will involve coordinated licensing efforts between local authorities and Central Government.

Additionally, businesses will be required to have point-of-sale (POS) machines to formalise transactions and improve revenue collection. Banks have also been directed to issue POS machines to all new account holders, as opening a bank account will become mandatory for businesses.

“Banks must make sure that as they open their (informal sector) accounts . . . because we are also making the opening of bank accounts a mandatory issue, they should issue them with POS machines to make sure we can formalise transactions within the sector,” Prof Ncube said.

A Push for Economic Stability and Growth

These measures reflect the Government’s renewed commitment to formalising the economy, boosting revenue collection, and creating a more equitable business environment. Formal businesses have long argued that the unregulated informal sector enjoys an unfair advantage, as it often avoids taxes and regulatory costs.

The Government believes that these interventions will help stabilise the economy, promote sustainable growth, and ensure that all businesses operate on a fair and transparent basis.

The crackdown on direct supply to the informal sector and the push for greater formalisation come at a critical time for Zimbabwe’s economy, as the Government seeks to address structural challenges and foster a more inclusive and regulated business environment.