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INFORMAL ECONOMY FORMALISATION IN ZIMBABWE UNDER NATIONAL POLICY FRAMEWORK THEME 2 – DEVELOPMENT OF LINKAGES BETWEEN THE INFORMAL ECONOMY AND FORMAL BUSINESSES

The Objective of this Theme is the development of a conducive business operating environment for informal economy businesses and workers.

  1. Creation of Business Synergies and Relationships with Business Membership Organisations (BMOs)

Synergies must be created between the informal economy and formal business organizations. This will require identification of what the informal sector can supply and the development of a business case and platform through which the two sectors can discuss issues of mutual concern.   Appropriate government policies can facilitate the creation of such synergies.   For example the formal business sector can assist in providing space for informal traders by way of creating supply linkages that are profitable for both parties. Informal traders can reach agreements with formal businesses to become part of their supply chains.

  1. Development of Supply Chains Involving both Formal and Informal Businesses

Organizations such as Buy Zimbabwe and Zimtrade can assist informal sector businesses to grow and supply required goods and services to formal businesses.   For example they can train vendors on the value of goods and services and include them in business supply chains as supplier clusters, thereby involving and benefitting more people than is the case with single large suppliers.   They can also provide assistance with product branding and marketing.

The informal economy can contribute to import substitution.   Informal sector businesses such as cross border traders are filling the gap due to the decline of the manufacturing industry in Zimbabwe.   For example, Zimbabwe pays for the import of tissue paper which can be manufactured locally by informal sector businesses, thereby reducing import and foreign currency costs.    

The development of supply chains involving formal and informal businesses is unpredictable due to the difficult current economic environment.   There is a need for government to be consistent and supportive in policy-making in order to optimise the development of such supply chains.

  1. Provision of Incentives for Formal Sector Businesses to Work with and Support Informal Economy Businesses.

Currently, Zimbabwe has favourable tax incentives for foreign investors.   Similar tax incentives can be offered to formal businesses who work with the informal economy.

Formal sector businesses and Business Membership Organisations (BMOs) can support the informal economy through:

  1. Helping to improve the quality of products supplied by the informal economy.
  2. Actively involving informal economy businesses in supply chains and value chains.
  3. Providing business training for informal economy businesses.

All of these services can be used as the basis for the provision of tax incentives to those providing them.

INFORMAL ECONOMY FORMALISATION IN ZIMBABWE UNDER NATIONAL POLICY FRAMEWORK THEME 2 – DEVELOPMENT OF LINKAGES BETWEEN THE INFORMAL ECONOMY AND FORMAL BUSINESSES

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