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It’s the policies stupid, SMEAZ tells govt

THE Small and Medium Enterprises Association of Zimbabwe (SMEAZ) has blamed policy inconsistencies as behind the headwinds facing the economy.

The economy is beset by a plethora of challenges that include deteriorating infrastructure and utility service delivery, exchange rate distortions, power cuts, brain drain, growing unemployment, forex shortages and high taxation.

SMEAZ chief executive officer Farai Mutambanengwe said there was a need to address the root cause of the problems facing the formal sector.

He was speaking at a two-day Employers Confederation of Zimbabwe 2025 Business Indaba held last week.

“When you look at the Zimbabwean context, the first thing is that our problem is not informalisation, these are structural issues. These are issues to do with policy; they are issues to do with the cost of doing business. In short, it is a hostile form of environment that is creating informalisation,” Mutambanengwe said.

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“So, I think for me, the first thing that we must do is to fix the toxic policies that are causing this informalisation. We need to address the cost of doing business, which is the elephant in the room.”

Authorities have in the past accused the informal sector of crowding out the formal sector, leaving some in corporate rescue as they battle for survival.

Mutambanengwe noted that whenever the informal sector competes with the formal businesses, it all boils down to the conditions of the operating environment.

“In a normal economy, your informal sector can never outcompete the formal,” Mutambanengwe said.

“When you have a situation where your tuckshops are outcompeting your formal retailers, obviously that points to an environment that is not conducive. So, we must fix that to start with.”

He said the cost of formalisation was too high to the informal sector.

“I think the issue is obviously to address those issues to start with. But to then look at the particular aspects of informalisation in the general context, I think first we need to separate between the informal operators and your typical SMEs,” Mutambanengwe said.

“Your typical SMEs are growth-oriented. In other words, they are people who are starting their own business. They may not comply fully with your formal requirements or your regulations, not because they do not want to, but because they are maybe still too small.

“You cannot have the same licensing requirements that your large corporations comply with to be imposed on an upcoming enterprise.”

He called for transitional arrangements based on the size of the company.

“You find that when NEC (National Employment Council) sets a minimum wage, that minimum wage then applies regardless of the size of the business,” Mutambanengwe said.

He also suggested that the government invests in infrastructure to enable formalisation.

“Then we come to the way formalisation is being imposed. The approach must not be what we are trying to do now, which is to say, that everyone registers for VAT [value added tax], everyone complies with this tax and that tax, and everyone has a POS [point of sale] machine. No, we cannot,” Mutambanengwe said.

“I do not think that is the correct approach. I think we need to look at it differently, probably more in terms of social safety nets. The issue of infrastructure is very critical to the conversation around formalisation. You will never be able to formalise people if you do not create the infrastructure.”

He said if the government created proper infrastructure, it would automatically get SMEs to pay their fair share to the fiscus.

Small and Medium Enterprises Association of Zimbabwe (SMEAZ) Farai Mutambanengwe