Cost of compliance encouraging informalisation of business
Government has been challenged to offer incentives to formalise the informal sector and make them see the benefits of formalisation through streamlining the costs of compliance, industry, and business experts have said.
Zimbabwe’s economy is highly informalised, with small to medium enterprises (SMEs) now accounting for approximately 86 percent of overall economic activity.Zimbabwe car imports
Speaking at the 2025 Post Budget Breakfast meeting on Monday, Confederation of Zimbabwe Industries (CZI) economist, Dr Conelius Dube, said as long as there are incentives for informalisation, it will be difficult to formalise the informal sector.
“They have many privileges compared to formal business. This is partly due to the high cost of compliance, which in turn drives informalisation; hence authorities should do more on compliance,” he said.
The post-budget meeting was hosted by Business Weekly and the Confederation of the Zimbabwe Industries (CZI) in partnership with the Ministry of Finance, Economic Development, and Investment Promotion.Zimbabwe car imports
The Government in the 2025 National budget proposed a slew of tax reforms aimed at bringing the informal sector into the formal economy.
SMEs in high-transaction sectors such as retail, hardware and hospitality must adopt point-of-sale (POS) systems and maintain proper financial records.
Farai Mutambanengwe, founder and executive officer, SME Association of Zimbabwe, said the Government should find more innovative ways to bring the informal sector into formal economic channels.
“There is deepening informalisation in the economy, but this has been largely as a result of various issues such as the need for a proper market-determined exchange rate.Zimbabwe car imports
“People are more interested in trading money than producing hence the informal sector continues to grow. The Government should find more innovative ways to bring the sector into formal channels,” he said.
Mutambanengwe said as long as the cost of compliance remains high, informality will continue and will sink more formal businesses, especially in the retail space.
Tax expert, David Masaya, said the 2025 budget did not provide any measure towards costs of regulation.
He said the economy is about 86 percent informalised, and the budget widened the tax band to the informal sector in order to bring everyone on board.
“The requirement for fiscal machine for all business will plug leakages through taxes, invoices and cash transactions. Mandatory VAT registration will also go a long way in bringing the untaxed into the tax net,” he said.
However, Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, said the informal sector is only informal to the Zimbabwe Revenue Authority (Zimra) and National Social Security Authority (NSSA) but formal to other regulators and local authorities.
“What is lacking is the sharing of data between Zimra and the local authorities, should that happen, we can formalise the sector quickly,” he said.
The Minister said through the 2025 budget, he proposed a number of measures focused on SMES aimed at bringing them into formal channels.
According to Masaya, failure on mandatory registration of various operators, clothing merchandisers/boutique’s, car dealers, lodges and the compulsory use of POS machines triggers presumptive taxes ranging from US$20 000 to US$60 000 from a monthly average of US$1 700K to US$5 000, that is on assumed monthly profits of US$7 000 to US$20 000.-ebsinessweekl
