Vendors Initiative for Social and Economic Transformation (VISET) notes the budget which will be announced on the 22nd of November 2018 by Minister of Finance and Economic Development, Mthuli Ncube.
We as representative of the informal sector which is contributing significantly to the economic development of the nation expect that the government should make the sector a priority. 98% of youths between 15-24 are employed in the sector while the sector makes 60% contribution to the GDP, these are significant contributions which require support of the government. As such we propose the following on the national budget so as to make it informal sector friendly:
1. Formalisation of the informal economy
We expect the national budget to take heed to our long-standing call to provide policy framework for formalisation of the informal sector. The current fiscal environment as it relates to formalisation of the sector’s is too stringent. In 2015 the International Labour Organisation (ILO) adopted the “Transition from the Informal to the Formal Economy Recommendation” commonly known as “Recommendation 204” which the government of Zimbabwe is signatory to. The Recommendation is built on a shared understanding and experience of ILO members states that it is through an integrated strategy, a policy mix and institutional coordination to promote the employment and income opportunities, the rights and social protection of the millions involved that transition to the formal economy can be best facilitated.
The prevailing tax regime makes it difficult for most informal sector businesses to acquire tax compliance certificates. Moreover, the presumptive tax which the government is eager to implement targeting such informal sector businesses as barbershops and hair saloons is unjustifiable especially when there is already a 2% tax on all mobile money transactions. Most of these operations make extensive use of electronic money and thus are already being heavily taxed. To add another tax would only make the tax burden too heavy and push most operators out of business.
2. Skills development for the informal sector
Skills development in the informal sector is crucial to empowering operators to increase their productivity. We therefore expect the budget to provide resources for skills development through Technical and Vocational Training Centres. Skills such as basic business management and value chain identification which can greatly improve profitability of the sector and increase its share of the GDP contribution should be made a priority for funding.
Part of the proceeds of the 2% electronic transactions tax can be utilized for this initiative as it is the informal sector which is paying the bulk of this tax.
3. Provision of social security
Social security is important for providing income upon retirement or incapacitation by accidents as such, the fiscal authorities should provide mechanisms for the informal sector to make social security contributions.
This can be done by availing social security numbers to which informal sector operators can use to make monthly payments towards their social security. Such as scheme should be transparent and providing real-time data as to how much contributors are worth at any given time.
4. Infrastructure development
One of the challenges facing the informal sector operations is lack of infrastructure which is supportive of the sector’s operations. Areas where vendors and other informal sectors operators are working from, especially in Harare, lack basic infrastructure such as toilets and ware housing facilities. As such, wares of the informal traders get damaged thereby affecting quality and profitability. The budget must make provisions to support infrastructure construction for the sector.
5. Inclusion of street vendors/informal economy players in policy development
Fiscal policy development has always been top down thus creating challenges when it comes to implementation. The fiscal authorities do not consult all stakeholders especially those in the informal sector when developing policy instruments and this has resulted in conflict with players in the sector.
We expect government through the national budget to commit to broaden its policy consultations to include players in the informal sector.
As VISET we reiterate our commitment and drive towards socio-economic transformation by continuing programmes and activities which enhance the informal sector. Furthermore, we will develop monitoring and tracking tools to track the budget and evaluate if it meets the sector’s expectations as set out here and in our various position papers submitted during budget consultations.
Source: Vendors Initiative for Social and Economic Transformation (VISET)