Mnangagwa's Cabinet resolves to corner vendors

As Zimbabwe's economy continues to spiral downward, the government has introduced a series of controversial measures aimed at taxing the struggling informal sector and vendors to boost state revenue. Critics argue that instead of addressing the root causes of the country's worsening economic crisis through effective and innovative policies, the government is placing an undue burden on the poor and informal traders while continuing to indulge in lavish expenditures, including luxury vehicles, foreign trips, and inflated allowances for top officials.

President Emmerson Mnangagwa and his Cabinet yesterday endorsed Finance Minister Mthuli Ncube's new measures, which have been described as "extortionist" by detractors. These measures include mandatory tax compliance for informal traders, stricter vendor licensing procedures controlled by central government, and a requirement for vendors to open bank accounts and adopt Point of Sale (POS) machines.

The government also announced changes to the foreign currency retention system, reducing the retention level for exporters from 75% to 70%. While banking charges and minimum deposit interest rates have been marginally reduced, critics say these adjustments are inadequate compared to the heavy toll the new taxes and regulations will impose on small traders and vendors.

A summary of the Cabinet resolutions stated, "Cabinet considered and approved measures to address challenges in the formal business environment, presented by the Minister of Finance, Economic Development and Investment Promotion, Honourable Professor Mthuli Ncube. Following the Monetary Policy Statement issued by the Reserve Bank of Zimbabwe on 6 February 2025, Cabinet observed a number of factors negatively impacting the economy and introduced a cocktail of short- and long-term interventions aimed at addressing these challenges while providing support to Micro, Small, and Medium Enterprises (MSMEs)."

The government's short-term interventions aim to enforce tax compliance and transition informal businesses into the formal sector. Measures include, the establishment of a domestic inter-agency team to enforce tax laws in the informal sector. It also includes a mandatory framework requiring vendors to obtain licenses through local authorities in consultation with central government and compulsory issuance of POS machines to all vendors upon licensing, alongside mandatory bank account registration.

In the medium term, the government aims to streamline processes and reduce costs for businesses, improve electricity supply through power plant construction, and encourage local procurement to support domestic industries. It also pledged to enforce compliance with the Indigenisation and Empowerment Act and promote alternative energy use.

However, these measures have sparked outrage among informal traders and critics, who argue that they unfairly target the poor while failing to address systemic corruption and wasteful government spending. Observers have accused the government of diverting state resources to fund Zanu-PF political programs and awarding inflated tenders to well-connected individuals, further deepening public distrust.

War veterans and civic groups have also expressed concern over the growing economic inequality and the government's inability to address the root causes of the crisis, including corruption, nepotism, and poor governance. The informal sector, which has become the backbone of Zimbabwe's economy amidst formal sector collapse, now faces increased pressure as traders struggle to comply with the new requirements.

The reduction in foreign currency retention has also drawn criticism from exporters, who argue that the move will discourage business growth and limit foreign currency inflows into the country. While the government claims the measures will bring stability to the economy, analysts warn that the excessive focus on taxation and regulation of small-scale traders may backfire, leading to increased resistance from the informal sector and worsening economic conditions.

As public discontent grows, the government faces mounting pressure to rethink its approach and implement more comprehensive reforms to revive the economy and restore public trust. Without tangible solutions to Zimbabwe's deep-seated challenges, the latest measures risk further alienating citizens and deepening the economic crisis.