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Zim’s free enterprise dilemma

21 Nov, 2014 - 00:11 0 Views

The ManicaPost

Ngoni Dapira
EVERYDAY we see vendors on the streets playing cat-and-mouse with the local authorities trying to earn a living from selling literally anything, from foodstuff to clothing.
There is a famous quote by the late illustrious America rapper, Tupac Amaru Shakur, in his song ‘‘Me Against the World’’, where he says: ‘‘how to make a dollar out of 15 cents.’

This quote, which generally means trying to make the most out of what you have, speaks volumes about the free enterprise dilemma in Zimbabwe as people are desperately going on the streets or starting micro or small to medium enterprises to earn a living.

The catch-22 situation forcing entrepreneurs on the streets evading formalisation comes in the wake of excessive competition from cheap imports from South Africa and China, which has run many out of business, especially those who were renting shops.

Since the introduction of the multi-currency regime in 2009, the competitive business environment filled with cheap imports has been a major dilemma for local entrepreneurs.

A survey among small and medium business owners in Mutare recently revealed that consumers have adapted to penny-pinching, characterised by a preference for lower-priced products, rather than value, due to the nail-biting liquidity crisis in the country.

Economist Mr Crispen Mukarakate said under such a scenario, the formal entrepreneurs were being forced to develop new marketing strategies and tactics to compete against cheap imports and other low-cost products.

“This explains the current dilemma where we have so many vendors and car-boot sellers on the streets.
“Operating a shop or a boutique comes with ‘unnecessary’ overheads of rentals and high utility bills in the Central Business District, so most now opt on cutting overheads and look for clients on the streets.

“Yes, this is unacceptable, but we have to look at the root causes which are the liquidity crisis, high rental charges and high utility charges among a host of other factors,” said Mr Mukarakate.

He said there was need for Government to address these issues or face an uncontrollable black market economy, which would eventually lead to empty office spaces in the CBD and no formal business.

According to the Labour and Economic Development Research Institute of Zimbabwe in its book ‘‘Beyond the Enclave’’, Zimbabwe’s budget has in the past focused too much on the formal sector and has not been employment oriented.

One of its authors, a labour economist, Mr Prosper Chitambara, said Zimbabwe’s formal sector was now an enclave in a sea of non-formality and a policy shift to capacitate the SMEs more was imperative.
In his inauguration speech last year, President Mugabe outlined a pro-people agenda for the new Government.

Mr Chitambara said there were several factors that need to be considered to fully develop the country’s SME sector.
“Few of these factors include creating funding of SMEs by local and foreign investors and purchasing new technology that is used in the market to assist SMEs add considerable value to their business,” he said.

He said SMEs were the future, but to formalise them needed policy shift, particularly in the existing labour laws and tariffs.
“Formalisation of the SMEs is what Government needs to work on. This will require a policy shift in the existing labour laws and tariffs.

“To stay afloat in this business we have to be low-cost producers which is what most entrepreneurs are doing, and in so doing flee formalising, which is where the bulk of the business overheads come from,” said Mr Chitambara.

Early this year the Harare City Council regularised vending operations in designated areas in the CBD during weekends under the guise of bringing sanity to the city regardless of this violation of its by-laws.

The designated areas were parking spaces and bus termini.
Harare City Council spokesperson Mr Leslie Gwindi said the move was in the interest of the city, given the sharp rise in entrepreneurs and hawkers in Harare.
The Grassroots Empowerment Flea Market and Vending Association Trust chairman, Mr Alexio Mudzengerere, whose organisation is responsible for the hawkers, said hawkers were not lawless, but were being forced to be on the streets because of the economic situation, even if it meant playing the cat-and-mouse with authorities.

“With the system put in place by Harare City Council, at least people are no longer losing money and goods to corrupt officers and can now conduct business freely. This will definitely work for all of us,” Mr Mudzengerere said.

The individual flea market operators now pay $2 daily for trading space, while fruit and vegetable traders and other vendors selling goods like dried foods, airtime and newspapers pay US$1.

According to the Minister of Small and Medium Enterprises and Co-operatives Development, Cde Sithembiso Nyoni, more than $7,4 billion not benefiting the fiscus was circulating in the informal sector.

A report by the FinScope Micro, Small and Medium Enterprises Zimbabwe Survey Report of 2012 revealed that 85 percent of the MSMEs in the country were not registered.

Mr Chitambara said the rise in MSMEs in the country was due to the massive retrenchment and dearth of the country’s manufacturing sector, which currently requires a huge capital boost to revamp operations.

In May, Cabinet tabled and approved the Second MSME Policy Framework (2014-2018) which is expected to introduce comprehensive measures to support the sector.
Among such measures are tax holidays for financiers which provide funds to the sector, whilst registered MSMEs will also be given a lengthy tax-free grace period to cushion them as they regularise their operations.

Under the framework, Government also plans to review customs duty and tariff regimes to assist players in the sector to access affordable raw materials.

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