We are merging all informal productive businesses into the formal economy by implementing desirable methods which include business registration, opening bank accounts in the trading names, tax clearance registration with Zimra, and many more ways. We have partnered with the Ministry of Women Affair, Community, Small to Medium Enterprises to orchestrate this milestone in a positive trajectory. Mr. Noel Mavura is the Founding Director of Africa Investors Hub and is also the brains behind the innovative formalization strategy. The move aims to facilitate these businesses’ access to funding, training, and marketing opportunities offered by the government, and enable them to participate in local as well as international exhibitions, and take their products to foreign markets. Additionally, Africa Investors Hub seeks to create an investment-friendly environment to increase the volume of investments and create more jobs for young people.
Currently, we have formalized 5640 informal traders and our utmost goal rush is to transition about half a million informal traders in Zimbabwe before year-end. Therefore we are calling all the financial institutions, embassies, private companies, nonprofit making organizations, etc which disburse lifeblood for businesses to consider our formalized companies since we are carrying out this for financial inclusion. We keep a close eye on their business operations and keep on mentoring as well as educating them. In any case, if they get funding, we check if the loan is being used for sustainable development purposes. We don’t want a situation where people can buy cars and getting married using the business funds. Africa investors Hub is here to create generational wealth by solving African problems. In addition, some foreign embassies and nongovernmental organizations are fostering human capital development by offering training and supporting mentorship programs for the informal sector through us. At the same time, they are leveraging our business network.
The government of Zimbabwe is losing a lot of revenues through the informal sector as
individuals and firms avoid taxes, social contributions, or compliance with standards and licensing requirements. This relates to the common but misconceived view that informality is caused mainly by firms and individuals “cheating” to avoid paying taxes. The banking system is also being eliminated in the business cycle when dealing with the informal sector. Informal firms do not contribute to the tax base and tend to remain small, with low productivity and limited access to finance. As a result, economic growth in regions or African countries with large informal sectors remains below potential. This is the problem we are solving as Africa Investors Hub hence formalizing this fundamental economy catalyst.
It is our ethical obligation to educate and raise awareness on formalization issues while calling the government to streamline business registration and regulations for the informal sector. Tax reform is also essential. If informal traders expect taxes to impose an excessively heavy burden, they are unlikely to formalize their operations. Thus, tax reporting should be simplified, online payment options should be introduced, and tax rates should not be too high.
Formalization contributes to the establishment of better (decent) jobs, creates a broader tax base that may allow lower rates, possibly increases investment. Formalization also leads to access to finance and market information, thereby enabling improvements in productivity. It is therefore imperative to resolve the challenges this sector faces and develop strategies for its formalization. In mapping out the way forward, it is important to build on some of the emerging good practices. The first important lesson emerging from the interventions through our company on the ground is that formalizing the informal economy should be comprehensive and multi-pronged.
Informality critical looking affects how fast Zimbabwe’s economy can grow, develop, and provide decent economic opportunities for the Zimbabweans. Sustainable development requires a retardant in informality over time, be that as it may, this process will inevitably be gradual. Informality is also tackled by steady reforms such as investment in education and policies that address its underlying causes. Attacks on the sector motivated by the view that it is generally operating illegally and evading taxes are not the fundamental solutions to the problematic factor.
This article was prepared by Mr. Noel Mavura, the Managing Director of Africa Investor Hub and he can be contacted using the following details.