GWERU, MIDLANDS —
Unending company closures have left thousands of Zimbabweans worried as the country’s economy continues to decline, forcing most people to venture into informal businesses.
But some informal traders are now concerned that the declining economy will negatively affect their small operations even though a few are recording good profits.
Gweru resident Francisca Tongogara and her husband ventured into the informal sector in 2008 when the Zimbabwe economy almost crumbled due to historic hyperinflation, which according to the International Monetary Fund, reached 500 billion percent that year.
Despite facing serious hurdles over the years after setting up their family business, Tongogara believes that she has achieved considerable success. She is now a proud owner of four taxis.
But Tongogara is quick to say she is worried about the current poor state of the economy, which may ultimately force her business to shut down.
The IMF, currently monitoring the country’s economy under a Staff Monitored Program, has indicated that credit and deposit growth in Zimbabwe have slowed down sharply, liquidity conditions are tight, and the banking system remains weak.
This has been worsened by the southern African nation’s precarious external position, low international reserves, a large current account deficit, an overvalued real exchange rate, and growing external arrears.
Tongogara says she will be driven out of business if this situation prevails as there will be no one to hire her taxis.
Another informal trader, 40-year old Shame Banda, who sells farm produce at a local vendors’ market, is also worried about the poor state of the economy.
Banda says if he had a choice, he would rather get formal employment as it offers better security than vending.
Some business executives in the formal sector like Trust Chikohora, who is a past president of the Zimbabwe National Chamber of Commerce, say they are also facing serious challenges.
The independent financial and economic analyst argues that government needs to take radical measures to resuscitate industrial production as an informal economy is not sustainable.
LACK OF CHEAP LOANS
Industrial capacity utilization is hovering at around 33 percent due to lack of cheap loans in Zimbabwe and insignificant foreign direct investment. International finance corporations have said sustaining higher growth and poverty reduction in the country will require comprehensive reforms over the medium term.
The economic downturn has even affected the legal profession as many people are failing to hire lawyers due to lack of disposable income in a country where the majority of people earn far below the poverty datum line of at least $540 per month for a family of six living in an urban set up.
Presenting the 2015 national budget last month, Finance Minister Patrick Chinamasa revealed that at least 55,000 workers lost their jobs in the past three years following the shutdown of over 4,600 companies.
Lawyer Reginald Chidawanyika says lack of disposable income has meant that most people - even those in need of these services – are not in a position to pay attorneys as they have to grapple with bread and butter issues.
Chidawanyika, who runs other businesses including a sports bar, agrees that there is need to adopt radical measures like dumping some controversial policies and the adoption of a zero tolerance towards corruption in order to revive the economy.
The government has been issuing contradictory statements about revising the much-feared black economic empowerment program launched a couple of years ago, which compels foreign-owned businesses to transfer a 51 percent stake to local people.
Some observers say as long as the government lacks the political will to implement meaningful measures to revive the economy - including attracting significant foreign direct investment - even the informal economy that is currently sustaining many lives, will ultimately collapse.