By Agnes Magunje
The Informal Economy in many countries continues to confuse governments and economists. Formalization has become the buzzing word, but is it applicable? A question that many attempt to answer but implementation becomes a challenge.
Economists struggle to figure out where the Informal Economy starts and where it ends.
Presently Zimbabwe continues to experience a rise in the sector and this was escalated by the damaging effects of COVID 19 to the economy, besides the already existing challenges.
In 2019 poverty rate at national line for Zimbabwe was 38.3%, it increased from 32.2% in 2001 an average rate of 10,32%.
The IMF data that ranks the poorest to the richest countries has since been updated making Zimbabwe not the second poorest but the 26th lowest out of 187 countries.
This encourages one to look at the unemployment rate which is constantly facing debates where others say its 6% but the ILO pegged it at 95% stating 70% to be unemployed youths.
The above statistics are the reasons why economist cannot understand why the poverty rate is this low when unemployment is so high.
This can only be explained due to the resilience of the people of Zimbabwe who continue to strive to make better livelihoods under shocks of whatever capacity.
Resilience is explained by Moberg (2019) as the capacity of a system, city or individual to deal with change and continue to develop. Hence the complex existence of the rising Informal Economy which many misinterpret it to micro businesses or small businesses which is not the case.
The Informal economy as described by ILO is all economic activities by workers or economic units that are in law or practice not covered sufficiently by formal arrangements.
The masses that have lost jobs and those that are earning very little subsidize their incomes or create income through informal businesses.
These may range from selling chickens that one rears in their own back yard to selling repackaged beans and mealie meal to make a living.
Is it possible to tax such a business? One wonders, someone making additional income to address disparities that have clearly been indicated by the large discrepancies in the poverty rate and the unemployment rate.
It is clear that resilience of the people participating in the sector cover the huge gaps by taking action and providing for their families at large, whilst covering up for some shortages and gaps in the market.
Many governments are unaware of the contributions of the Informal Sector and are oblivious of the everyday realities that lead more people to engage in the informal economy.
It would help for political leaders to start listening to the entrepreneurs, staff and leaders working in the informal sector to formulate more inclusive policies that may prove more relevant for development.
Agnes Magunje is a Strategic Change Agent, Business Consultant and Projects Manager for Informal Traders Empowerment Association. She is a champion for women empowerment who is passionate about transforming small businesses into big entities.
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