President Emmerson Mnangagwa, alongside his two vice presidents and key economic ministries, convened an emergency economic session on Thursday to address the growing informalization of Zimbabwe’s economy.
The high-level meeting, held during the president’s annual leave, focused on new measures to support struggling formal businesses and curb tax evasion in the informal sector.
According to Finance Minister Professor Mthuli Ncube, since 2021, the country has recorded steady economic growth, averaging 5.5% annually.
However, a 2% slowdown in 2024—largely due to the El Niño-induced drought that hit agriculture and electricity generation—has raised concerns about the country’s economic trajectory.
Professor Ncube pointed to an emerging trend that threatens economic stability.
“There is an emerging phenomenon with indications that the economy is informalizing, particularly in the retail and wholesale sectors, with serious ramifications on the overall economy,” Ncube said.
Formal Businesses Under Pressure
He said since early 2023, some manufacturers have begun bypassing wholesalers and retailers, supplying products directly to informal traders.
This shift has placed formal businesses under immense strain, as they compete with informal vendors who often evade taxes, licensing fees, and labor laws.
To address this, the government has already implemented a series of measures through the 2024 Mid-Term Budget and the 2025 National Budget.
These include a 5% withholding tax on unregistered Micro and Small Enterprises (MSMEs) and a reduction in the VAT registration threshold from $40,000 to $25,000, encouraging more businesses to formalize.
Additionally, certain products—such as alcohol, dairy items, detergents, and sugar—will now be considered smuggled unless sellers provide proof of duty payment.
Cracking Down on Informal Traders
Despite these measures, the government believes more needs to be done.
“Government is therefore proposing additional measures to promote formalization and tax compliance by the informal sector,” Ncube said
These include the mandatory use of point-of-sale machines by all informal traders, stronger enforcement of tax laws, and preventing manufacturers from supplying goods directly to informal markets.
A Domestic Interagency Enforcement Team will also be established to oversee compliance.
The Reserve Bank of Zimbabwe is expected to introduce further monetary policies aimed at formalizing the market.
Meanwhile, the government will streamline regulatory processes and reduce fees to lower the cost of doing business.
“Enforcement of the Indigenization and Economic Empowerment Act, which provides for reserved sectors, will be strengthened. Additional incentives will be introduced to support industry, including duty-free imports and Special Economic Zones benefits,” Ncube added.
A Push Toward Vision 2030
While the informal sector has long played a crucial role in Zimbabwe’s economy, accounting for a significant share of employment, officials argue that its unchecked expansion is hurting formal businesses and tax revenue.
“Government is committed to improving the business environment in order to curb the informalization of the economy as we move towards Vision 2030,” Ncube said.
Vision 2030, Zimbabwe’s long-term development blueprint, aims to transform the country into an upper-middle-income economy.
However, with formal businesses struggling and illicit trade growing, the success of these new measures remains to be seen.
