Martin Kadzere and Peter Matambanadzo
INNOVATION for economic transformation in Zimbabwe has always come about during times of hardships, true to the old adage “necessity is the mother of invention.”Zimbabwe, during the era of Ian Smith industrialised under sanctions after his regime instituted import substitution measures to burst the embargo.
In the current environment, people have taken it upon themselves to “burst” the economic challenges through the uptake of various survival strategies.
Government’s message on the creation of an empowered society has resonated well with the general populace who have in turn no longer rely on formal employment for sustenance but have created their own small businesses in the process economically empowering themselves.
The culture of being an employee in big businesses has been replaced by an empowerment mentality in which the man in the street has effectively become “his own boss.”
While a lot of workers have been thrust into this situation as a result of job losses in the formal sector, there has been a substantial redistribution of wealth from big business to small business, thereby empowering previously not empowered workers.
“I lost my job is 2008 when a furniture company that I used to work for closed,” said Gabriel Matida, a carpenter at Glen View Area 8 complex.
“Unfortunately, with all the experience that I had gained for the eight years I worked for my former employer, it was difficult to start my own things because I did not have capital.
“I was given a package but I failed to take out the money from the bank because of regulations that the Reserve Bank had imposed on cash withdrawal limitations.
“My siblings, who were working in South Africa then raised some capital and I started producing small household furniture items. I have now grown and I am not complaining.
“I now employ six people, living decent lives, sending their children to school and I can proudly say my job loss was a blessing in disguise. I am better off than when I was formally employed.”
According to the Zimbabwe National Statistical Agency, Zimbabwe has an unemployment rate of 11 percent, contrary to claims by some economists that the country has a joblessness rate of more than 85 percent.
ZimStat said most people in the country were economically active and only 11 percent were unemployed.
A according to its Census 2012 survey, about 3,5 million people aged between 15 and 40 were employed in various facets of the informal sector, with agriculture topping the list.
The Zimstat data on activity from the 2012 Population Census said about 59 percent of the total population (13 million, which is 7,7 million) was in the age group 15 years and above.
The economically active population constituted 67 percent of the active population (5,1 million), and of this population 11 percent (567 941) were unemployed while 89 percent (4,5 million) were employed by the informal sector.
The informal sector has contributed to poverty alleviation and reduced individual and household vulnerability.
Big businesses have been replaced by SME’s, informal traders and small scale enterprises in key economic sectors of agriculture, mining, retail, manufacturing and construction.
The loss for big business has been gain for individual economic empowerment.
The multi-currency regime has also led to economic stability and attractive returns for small business, a case in point being the revolutionary socio-economic transformation that is being observed in the tobacco growing communities.
“The informal sector is thriving and continues to grow despite the liquidity challenges which continue to hamstring big business,” economic commentator Mr David Machingaidze said. “With over 60 percent of the population living in the rural areas and the bulk of the urban population operating in the informal sector, it is clear that the informal sector has become the biggest employer in the country.
“That being the case, one would also expect that the bulk of money in the economy is circulating within the informal sector. This would explain why liquidity challenges are greatest in the formal sector, which may not have access to cash circulating within the informal sector.
“That is why the bankers association has commenced a project to estimate cash flows in the informal sector.”
About $3,5 billion is estimated to be circulating in the informal sector, according to ZimStat.
Social commentator, Dr Nhamo Mhiripiri, said in an interview Zimbabweans had found an alternative way of survival through innovation and employing themselves following the systematic and calculated collapse of industry and commerce, which resulted in downsizing and closure of companies caused by the illegal sanctions.
What is lacking from the Government policy side is institutional framework meant to recognise and regularise informal sector and SMEs as real businesses.
Government must come up with policies to support the establishment of industrial clusters for SMEs.
Other incentives such as preferential treatment on procurement and establishment of an SME bank are necessary to support SMEs.
About 99 percent of the EU businesses is made up of SMEs. Hence, the growth of SMEs is critical for economic growth.
“There is need for growth in micro finance sector,” said Mr Machingaidze. “With most MFI’s lending to urban based or SSB employees, there is a lack of micro-credit, micro insurance and micro deposit taking institutions in the rural areas, where the bulk of the population resides.
“Private sector players need to move beyond the traditional urban micro finance model. They need to source funding from donor and DFI communities as well as private equity players. The current growth in small scale agriculture and related downstream industries creates a viable growth market for micro lending.
The Zimbabwe Agenda for Sustainable Socio-Economic Transformation recognizes the importance of the informal sector and the SME’s and it seeks promote strategic linkages between the informal and the formal sector.
These linkages will cover a wide range of areas such as procurement, distribution and sales, contract farming, franchising and leasing, sale of financial services, ICTs, outsourcing non-core functions and productive inputs and tools.
Key to these programmes is capacity building of SMEs and the informal sector to meet the needs of a large firm.