Zimbabwe's biggest threat to business formalisation is currency

Zimbabwe's biggest industry body has urged government to abandon its aggressive campaign against the informal economy, warning that heavy-handed tax raids on backyard businesses amount to a futile war on survivalist hustles.

The informal economy has grown into Zimbabwe's most influential sub-sector, accounting for an estimated 76 percent of the country's US$54 billion gross domestic product - roughly US$41 billion circulating outside formal structures. This shadow economy has long frustrated policymakers, who are desperate to broaden the tax base.

Speaking at Old Mutual's Better Future 2025 Summit, Confederation of Zimbabwe Industries (CZI) chief executive officer Sekai Kuvarika said government needed a fundamental rethink.

"Small economic activities or micro activities are self-employment," Kuvarika said. "They are subsistence to a great extent and must just be treated as tax-free businesses, because some of them are actually not turning over an amount that is equal to your minimum monthly tax-free threshold incomes."

She argued that what informal operators required was recognition, not punishment. "Maybe all they need is identity in the first place — just being able to be identified as a business or as an economic activity, providing us with the knowledge of how many economic activities we have, and not require anything from them," she added.

Finance and Investment Promotion Minister Mthuli Ncube has stepped up efforts to tax the sector, insisting it holds untapped revenue potential. The Zimbabwe Revenue Authority (Zimra) has already introduced measures compelling commuter transport operators to pay taxes before renewing licences. Treasury believes a hidden goldmine of resources is circulating within the parallel economy.

But Kuvarika's remarks highlight the growing rift between policymakers and industry leaders over how to deal with informality. Authorities and corporates have long blamed the sector for destabilising banks, undercutting formal businesses and starving the state of revenue. For millions of Zimbabweans, however, informal trade is a lifeline in an economy with scarce formal jobs.

More than 1,5 million people are estimated to eke out a living from unsafe artisanal mining of abandoned gold claims, while millions more flood urban pavements selling fruit, clothes and cellphone accessories.

Zimbabwe National Chamber of Commerce CEO Christopher Mugaga told the summit that the real obstacle to formalisation was the currency crisis. "The biggest threat to formalisation is currency," Mugaga said. "There is now competition between the pillow and the banking vault," he added, pointing to widespread distrust in banks after years of failed currency policies.

That mistrust is deeply rooted. The 2008 collapse of the Zimbabwe dollar under hyperinflation, followed by repeated failed attempts to reintroduce local currencies, has left lasting scars. Even the ZiG, backed by gold and foreign reserves, depreciated within months of its launch in April 2024, reinforcing dollarisation.

Reserve Bank of Zimbabwe deputy director of economic research William Kavila defended the central bank, saying a dedollarisation road map was underway. But analysts argue that credibility takes years of consistency to build.

Cabinet approved a formalisation plan in January 2025, which included compulsory use of point-of-sale machines by informal traders, but progress has been limited.

For industry, the message is clear: coercion will not work. "Formalisation should not be a punishment," Kuvarika warned.