The Informal Sector
Zimbabwe’s fast growing informal sector is now the country’s largest employer as the economy worsens but lack of coordination and assistance from the government and other stakeholders is hindering small entrepreneurs from attaining full potential.
HARARE: Described as the "dark side" of the economy, there are no definitive statistics on the informal sector, which markets everything from toiletries, motor vehicle spares to basic commodities that are scarce or too expensive on the local market.
However, a study by the Confederation of Zimbabwe Industries found that in November 2000, at least 1.7 million people were making their living in the informal sector.
In that same year, 9 684 workers were retrenched while in the last 18 months a further 90 000 people are estimated to have been forced out of formal employment and would naturally have been forced to become small traders.
In addition, thousands of job seekers are being spewed out of Zimbabwe’s school system every year with little chance of finding work in an economy that saw 400 companies shut down in 2000 and a further 700 closing in the past 18 months.
Against this background, analysts believe employment in the informal sector has far surpassed that in the formal economy, where only about 40% or 2.7 million of the 6.7 million working adults in Zimbabwe are still employed.
"The informal sector sometimes acts as a buffer for cyclical trends in the formal sector by providing a ‘dumping ground’ for retrenched labour and a waiting station for job seekers," Zimbabwe Congress of Trade Unions economist Godfrey Kanyenze told the Financial Gazette.
But while the government and other stakeholders in the economy have begun to realise the sector’s importance, there is still very little assistance for many small entrepreneurs and some are operating at below capacity because of lack of funds.
According to Constance Sekete, managing director of Kingdom Financial Holdings’ subsidiary MicroKing Finance, more than 90% of entrepreneurs in the informal sector have no access to banking facilities at all. In cases where the operators have access to financial institutions, most have no collateral and therefore are unable to secure loans from banks.
Washington Dzuda, who left his job last year to start an enterprise manufacturing and selling toiletries, said he started the business after realising that he could earn more by developing a new line of toiletries to sell to local hotels.
"Most banks require collateral in the form of property for them to give you a loan," Dzuda told the Financial Gazette.
"Even the business proposal they require is prohibitive as the slightest mistake may prevent you from getting the loan. The high interest rates also make it difficult to commit yourself. Because of this I am having problems in financing my project," he added. Because he does not have sufficient capital, Dzuda could only afford to hire three workers and install two machines, thereby slowing down his production.
To create employment through the informal sector, the government has initiated projects such as the Masvingo-based Informal Sector Training and Resource Network, run by the Ministry of Higher Education and Technology in conjunction with German Technical Cooperation (Zimbabwe).
In operation since 1995, the network encourages entrepreneurs to come up with income-generating projects and then provides funding and training for implementation. But Kanyenze and other informal sector entrepreneurs said many small business operators were unaware of the organisation’s existence.
Analysts said there was little coordination between the ministries of Youth, Gender and Employment Creation and Industry and International Trade, both involved with the informal sector.
"All these initiatives lack coordination and the ministry responsible for the informal sector is particularly useless as it has no staff to man any proposed projects," Kanyenze said.
Doris Kumbawa, Financial Gazette, Zimbabwe, HARARE, 12 June 2002