The false US$7 billion in the informal sector

1
1946

A BIG false story is doing the rounds these days and it goes as follows: “Zimbabwe is an US$11 billion dollar economy.
“Sadly, however, only four billion of these dollars are in the formal economy.
“The rest, which is US$7 billion, is out there in the informal sector which is flourishing while the formal sector is on the verge of collapse.
“This is the reason why this country is in a liquidity crisis.”
The flipside to the above false story says: “Since the informal sector is now almost twice bigger than the formal sector, all our efforts should now be concentrated on this sector and we should not worry ourselves too much about promoting big business, big manufacturing firms and big mining concerns for imports will take care of our needs.”
It is our submission that it is absolutely false to say there is some mysterious US$7 billion that is sitting pretty in the so-called informal sector.
To start with, to date nobody in this country has ever carried out a scientific study that has categorically established that there is a US$7 billion treasure chest in the informal sector.
All this talk about US$7 billion sitting in the informal sector is being bandied about to confuse the people as well as paint the country as a whole in bad light saying the country has deteriorated to a ‘Musika only’ economy.
What makes up the informal sector in Zimbabwe?
A quick look at this sector reveals the following activities as being in the sector: vegetable vending, flea markets, tin smithing, ‘makorokoza’, ‘mabhande nemawatch’ vending, ‘makombi’, ‘kuba nekuhura’, ‘shebeens’ small-scale activities such as, carpentry, furniture making, brick making etc.
Are the above activities the place where US$7 billion is?
Can anyone in Zimbabwe seriously tell me that our country’s major cash reserves can be found at Mbare Musika, Mupedzanhamo, musika wehuku in Mutare, Renkini in Bulawayo etc.
How can it be possible that a sector where you find very low value goods in general, ends up having almost double the money to be found in areas of high value goods such as OK Bazaars, the banks, Zimasco, Zimplats mines, Marange diamonds, Delta Beverages etc even if they are not at full capacity.
Can you believe this false story?
Let us briefly look at the nature of the informal sector itself.
It is important to note that the informal sector itself is not an economic sector capable of standing alone.
It is a sector which is highly dependent on the formal sector for the goods it sells and its very market.
The informal sector is a downstream industry of the main industry which is the formal industry.
It is therefore illogical for someone to say the informal sector can ascend to dizzy heights while the very industry on which it depends on to exist is performing badly or is completely dead.
Let us give some examples to support our argument.
When the giant Zisco-Steel manufacturing company was still performing, downstream industries in the informal sector were flourishing; wire making, ‘ngoro’ making, window frame making etc.
However, when Zisco-Steel died, the above activities scaled down tremendously with wire making coming to zero.
A mining enterprise gives an even better example.
When Kamativi Tin Mine was operating at its height, there were a lot of informal activities that arose as a result of the mining activities at that mine.
When the mine died, however, all the informal sector activities died with it too.
It is therefore incorrect to say the informal sector can outgrow, out-earn, out-perform the formal sector.
It does not make any economic sense.
It is like saying a child can give birth to its mother.
It is absurd.
And so the story that says there is a US$7 billion (almost double that in the formal sector) Kit sitting in the informal sector is false.
The vegetable vendor relies on the farmer, the shebeen queen relies on Delta Beverages, the small-scale brick maker relies of Lafarge cement etc.
MaZimbabwe the formal sector is not worth US$7 billion as alleged.
Research has shown that a policy that encourages the flourishing of the informal sector in urban areas encourages massive rural to urban migration which has dire consequences.
In the long run, the cities end up failing to provide the necessary services to the new bloated population.
For example, because houses will not be enough for so many people, the new migrants into towns end up in squatter camps and slums.
Furthermore, water and sewerage system fail to cope.
“For instance, metropolitan Cairo is attempting to cope with a population of 10 million people with a water and sanitation system built to serve two million.”
The same goes for Harare etc.
Cities cannot also cope with refuse removal.
And so unofficial dump sites mushroom all over the locations and squatter areas. There is also widespread dumping of refuse in sewer lines, urban streams, drains etc leading to clogging of the systems.
Resorting to living in squatter areas leads to indiscriminate defecation and diseases such as cholera.
Don’t forget Zimbabwe cities suffered from cholera recently.
What we have stated above applies to all cities in Zimbabwe and if we are not careful a policy of informal sector promotion will steadily lead to ruralisation of our towns to a point where my ordinary village in Gokwe, Gutu, Musana etc will have a better environment than that found in Harare suburbs.
Already in Harare people are fetching water from self-made wells which are heavily polluted by sewer water.
The ‘kombi madness’ we are seeing in all cities in Zimbabwe is as a result of the glorification of the informal sector.
It will only end once the transport sector is formalised.
In conclusion, there is no US$7 billion in the informal sector.
We must focus our attention on reviving our industries, businesses and mines.
That will lead to economic growth of this country.
We must not put all our efforts at promoting the informal sector.
This as we have shown has a huge negative impact on the character and image of our towns.
Instead, we must go back to promotion of developing growth points which our government rightly started in the 1980’s, but has since stopped.

1 COMMENT

  1. Just rhetoric and no facts as usual. FinScope Zimbabwe carried out the study in 2012 and concluded that the is US$7.4 Billion in the informal sector. I am not validating this study but all I am saying is please bring some scholarly arguments before rambling.

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