Analysts have urged policymakers and stakeholders to prioritise the protection and support of SMEs to ensure sustained economic development and stability as it is the backbone of the economy.
This comes after the small and medium-sized enterprises (SMEs) have continued to be the unsung heroes, serving as the primary engine of growth and the largest employers in the nation.
According to the latest labour force survey by the Zimbabwe National Statistical Agency (ZimStat), 79 percent of the working population in Zimbabwe is employed in either the formal or informal sector.
In its 2023 Third Quarterly Labour Force Survey, ZimStat says the unemployment rate in Zimbabwe is 21 percent.
“Informal sector excluding agriculture constituted 46,6 percent and agriculture sector constituted 18,0 percent of all employed persons,” ZimStats said.
The informal sector contribution to gross domestic product (GDP) is estimated to be just below 50 percent, which translates to about US$17 billion if the 2023 third quarter GDP figures are considered.
Zimstat recently pointed out that 77 percent of domestic expenditure is done in foreign currency, which also means billions of transactions are done in hard currency and mostly dominated in the informal sector.
Economist Tinevimbo Shava said, “With the informal sector employing such a number of people, it means it has the capacity to drive growth in the economy with the formal sector anchoring it.
“We need to move forward as a country and be innovative to include the sector in most of our planning and reap rewards.
Another analyst, Gladys Mutsopotsi – Shumbambiri said authorities need to capture how big the sector is and make it contribute to the fiscus.
“The informal sector is proving to be huge and treasury has to come up with ways to tax the sector even if it means giving them super discounted tax rates to encourage them to pay and boost our purse. This will result in other sectors facing reduced taxes that are overburdening them,” she said.
Economist Dr Prosper Chitambara believes that one of the key reasons SMEs are vital to Zimbabwe’s economic fabric is their ability to adapt swiftly to market changes.
“Unlike large corporations that may struggle with bureaucracy and rigid structures, SMEs can pivot quickly, identifying and seizing emerging opportunities. This agility not only promotes entrepreneurship but also fosters a culture of innovation that is essential for sustained economic growth,” he said.
Farai Mutambanengwe, chief executive officer of the SMEs Association of Zimbabwe (SMEAZ) also believes that in order to pull the SMEs to the mainstream there needs to be growth of businesses such that they become too big to be informal.
“We need to lighten up the costs of taxes and regulations such that we loosen up the complexities of laws in the formal sector which scare those in the informal sector.
“Without those adjustments, the country will continue to lose potential revenue to the heavy informalisation of industry,” he said.
SMEs are renowned for their ability to generate employment on a large scale and with their nimble structure and adaptability, these enterprises create job opportunities in diverse sectors, including manufacturing, services, and technology.
Their role in providing entry-level positions and promoting inclusivity within the workforce cannot be overstated.
“By fostering job creation, SMEs become instrumental in alleviating poverty because they empower individuals with the means to support themselves and their families, contributing to a more equitable distribution of wealth. As SMEs flourish, the ripple effect extends to local communities, driving economic growth from the grassroots level,” Mrs Mutsopotsi-Shumbambiri added.
Recognising the pivotal role of SMEs, Government should increasingly implement policies to support their growth. Access to finance, streamlined regulatory frameworks, and targeted incentives are crucial elements in fostering a thriving SME sector.
The analysts and economists agreed that safeguarding SMEs in Zimbabwe is not merely a matter of economic policy but it is an investment in the nation’s future. As the largest employers and the engine of the economy, SMEs play an indispensable role in shaping a prosperous and resilient Zimbabwe and are vital for the attainment of Vision 2030.