The missing link in the Zim economy
In strategic thinking circles, a strategy is a long-term plan worked over through time. This implies that strategies are crafted and not stumbled upon. The general conception therefore follows that dreamers may live to best live their dreams.
In their book: Exploring Corporate Strategy (2011), Whittington and Scholes define strategy as, “the long-term direction of an organisation." Generally, strategy operates at corporate, business and operational levels. At operational level, strategy is concerned with how the components of an organisation deliver effectively on the corporate and business level strategies in terms of resources, procedures and people. There should be a gainful interaction for and in support of the other among resources, processes and people as key operational parameters.
In the strategic mix, we therefore reflect on how the segments of an organisation or entity co-exist with and for each other towards achievement of the intended group goals. In the case of the Zimbabwean economy, it is common knowledge that it is made up of the micro- and macroeconomy. While individuals and companies generally work at the micro level, the quality of the general macro-economic climate defines the general stability or volatility of the economic performance. The term economic stability, therefore, generally implies the state of the macro economy as premised on economic policies and themes set out by central government.
Based on the foregoing, it is fact that failed policy linkages and lack of goodwill from participants lead to skewed resource allocation and failure to realise envisaged strategic paths. In the case of the Zimbabwean economy, the creation and subsequent adoption of the Indigenisation and Economic Empowerment policy were key policy directions. There was a need to come up with complementary policy positions to allow for gainful engagement of people and resources based on good will. Thus, such policies would ensure that products from the economic policy would subsequently feed into to the macro economy as opposed to the micro level alone.
The Indigenisation and Economic Empowerment frame gave birth to a widened informal sector. The pertinent questions which must be asked are:
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Is our informal sector properly registered with central government and does central government have any control over the informal sector?
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Is our informal sector feeding into the mainstream economy or it is acting as an economy outside the economy?
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Is there goodwill among the informal sector players and government for the establishment of gainful and supportive operational linkages?
Generally speaking, the informal sector was supposed to remain generally aligned and controlled by the oversight role of government in protection of proper business ethics. This would have enabled informal sector support of the fiscus through taxation and general business and corporate discipline. In a way, the informal sector would be the government’s baby in terms of business accountability.
Reading on the Stokvels in South Africa, we generally learn that each informal sector unit is registered and with that registration certificate comes collateral allowing the Stokvel to borrow from financial institutions. The government followed up by rolling out a special programme to allow for lower cost of borrowing for Stokvels. The registration and follow up support has dealt away with business level indiscipline such as tax evasion. Thus, the $40 billion Stokvel sector (as at 2018) ploughed back significantly into the rand economy. This also helps to deal with an awkward scenario where money that circulates in the informal sector becomes more than what is in the formal banking sector as is the case in Zimbabwe.
In the case of Zimbabwe, the Indigenisation and Economic Empowerment policies created a huge informal sector but the linkages for alignment of the informal sector to the mainstream economy remain a nightmare. The banking system has offered no financial support to the informal sector as they are said to have no collateral to support borrowing. The high cost of banking and credit also negatively affect the sector. As a result, the informal sector has shunned the banking system yet such participation in the banking sector could have been positive for the growth of the economy.
The banking sector in Zimbabwe has to review its concept of bank charges, review its approach to dealing with the informal sector to lure back the informal sector into the mainstream economy. Government also has to display good will by adopting amicable banking regimes through the Central Bank to deal with lending rates and capital support for the informal sector economy so that it can positively contribute to economic growth
It’s however not impossible to rectify our situation. There is need to go back to where we went wrong and employ corrective action before further damage is made. It is critical that we register all informal sector elements, accord them collateral on borrowing for investment and ensure tax returns and economic growth.
A strategy is a long term dream. Policy co-ordination is the answer in addition to government’s good will, proper resource allocation and collaboration in the conduct of business. The informal sector is our link to inclusive economic growth and it’s not late to align our act in long as the good will exists.
Muzondi Jimmy is a strategic manager and author. These weekly New Perspectives articles are co-ordinated by Lovemore Kadenge, an independent consultant and past president of the Zimbabwe Economics Society. — kadenge. zes@gmail.com or mobile +263 772 382 852.