Bid to formalise small businesses

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THE government has intensified its consultative process of engaging relevant stakeholders in the registration of Micro, Small to Medium Enterprises (MSMEs) in a bid to find best strategies of formalising the informal sector.
The sector has become one of the main drivers of the country’s economy.
Globally, it is a recognised fact that SMEs are the hub around which national economies revolve.
Almost all businesses start off as small enterprises before graduating to become medium-sized, then large.
It is this constant process of enterprise generation and growth that results in the overall growth of any nation’s economy.
In Zimbabwe, most people have resorted to creating their own employment through income generating projects, leading to the growth of MSMEs.
The Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-ASSET recognises the role played by MSMEs in fostering sustainable economic growth and improved livelihoods.
The 2014 fiscal policy recognises the ‘death’ of the old economy and the rise of a new economic order spearheaded by the growth of SMEs.
However, the FinScope Micro, Small and Medium Enterprises Zimbabwe Survey Report of 2012, reveals that 85 percent of the MSMEs in the country are not registered.
In April this year, the Zimbabwe Revenue Authority (ZIMRA) announced that it would introduce a cocktail of measures to formalise MSMEs to pay taxes and contribute directly to economic growth.
Part of the measures was to hire experts from South Korea to assist Government in formalising the sector that is said to hold about US$7, 4 billion which is failing to enter the formal sector.
The MSMEs are said to have created more than 5, 7 million jobs from 2, 8 million small businesses, while 800 000 medium enterprises were employing about 2, 9 million people.
In May, Cabinet tabled and approved the Second MSME Policy Framework (2014-2018) which is expected to introduce comprehensive measures to support the sector.
Among such measures are tax holidays for financiers that provide funds to the sector, while registered MSMEs will also be given a lengthy tax-free grace period to cushion them as they regularise their operations.
Under the framework, Government plans to review customs duty and tariff regimes to assist players in the sector to access affordable raw materials.
In an interview with The Patriot, the Ministry of Small to Medium Enterprises deputy director of Research and Policy Development, Tabani Shoko, said the consultative meetings were aimed at getting inputs from relevant stakeholders to establish best strategies of incorporating MSMEs into the mainstream economy.
“There are agreed facts that the Zimbabwean economy is going informal that means the MSMEs are growing, hence their need to contribute to economic growth,” he said.
“However, the recognition of MSMEs in the mainstream economy is still limited.”
Shoko said the formalisation would help to grow MSMEs into large enterprises by building investors’ confidence through joint ventures and partnerships with small business entities.
“The most widely appreciated benefit of running a formalised enterprises is that it gives business operators freedom from corruption, harassment and confiscation of property which the informal sector operators frequently experience,” he said.
The director of Finance and Administration in Ministry of Small to Medium Enterprises, Wellington Goba said registered MSMEs would be prioritised for capital assistance from the Government.
“We have managed to secure about US$3 million from an Arab bank through the Ministry of Finance to assist MSMEs with affordable loans to small business enterprises,” Goba said.
“This is going to work as an incentive for MSMEs to register as only the registered will be eligible for this loan facility.”
However, most of the small businesses, are operating secretly to evade tax.
The Zimbabwe Chamber of Small and Medium Enterprises president, Daniel Zinyemba said the existing regulatory framework policies on industry and tax regime were prohibitive to the growth of MSMEs.
“The reason for formalising should be to grow the MSMEs so that they become large corporations capable of contributing meaningfully to the fiscus,” he said.
“If we approach the issue of formalisation from the angle that we want to tax the MSMEs, then we will only succeed in driving them further underground, or killing the sector.
“The Government must harmonise other accumulative taxes that come as a result of registration.”
It is imperative to note that Zimbabwe’s thrust as a nation towards indigenous ownership of the means of production, in the context of limited capital, makes MSMEs development the only viable route to economic expansion.
MSMEs are generally less capital-intensive, and make greater use of labour, land and entrepreneurship, which are the factors of production the country has in abundance.

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