The Covid-19 pandemic has impacted the structure and shape of economies across the globe. In the case of Zimbabwe, the limited economic activity that has come as a result of Covid-19 social distancing measures has created new risks such as (i) company closures, (ii) increased levels of formal unemployment and (iii) shrinkages in the value of exports receipts. According to the World Bank, Sub Saharan Africa (SSA) in now seeing the emergence of a “new poor”. This new class is different from the existing poor. The new poor are mostly based in urban areas and employed in informal services.
Company closures and limited informal sector activities are happening at a time when labour unions and other independent bodies have pegged the unemployment rate in Zimbabwe at between 80% and 90%. According to the Intercensal Demographic Survey, 8.1 million people in the country are aged 15 and above and 60% of that population is economically active. The largest proportions of economically active persons are in the age range 20-44 years for both males and females. With limited formal employment opportunities (especially for youth), there has been escalation of self-employment with some citizens moving into vending and small businesses. There is clear evidence the Zimbabwean economy is largely informal. Despite some lock-down restrictions, there has been a proliferation of informal road-side businesses in Zimbabwe (mostly car-boot shops). RSBs is an acronym that Piggy coined that means Road-Side Businesses. These types of businesses are informal, mostly operate without a fixed premise and in most cases on roadsides or in open spaces. Piggy has witnessed the mushrooming of RSBs in medium density surburbs like Westgate and Malborough in Harare. This suggests a trend which signals an explosion of RSBs and the informal economy in Zimbabwe.
Examples of Informal Sector Businesses in Zimbabwe (RSBs)
In its report entitled, “Shadow Economies around the World: What Did We Learn Over the Last 20 Years?”, the IMF ranks Zimbabwe as having the second largest informal economy as a percentage of its total economy in the world, after Bolivia. Out of which 158 economies that were studied, Zimbabwe has a score of 60.6%, second to Bolivia which topped at 62.3%. The shadow economy (known by different names such as the hidden, gray or informal economy), includes all economic activities which are hidden from official authorities for monetary, regulatory, and institutional reasons. The growth of the informal sector in Zimbabwe has largely been attributed to high levels of unemployment. Those without a salaried job typically engage in small businesses in order to generate a steady stream of income while those with salaried positions often have side businesses to supplement their monthly earnings. Some side businesses include hair-braiding or barbering, baking cakes, selling home-cooked meals, raising and selling chickens, pigs, or goats, selling home-care and cleaning products and homemade crafts. Other income sources include offering rides as an informal taxi, selling eggs or vegetables grown in a garden at home.
Overall, companies operating in Zimbabwe will have to position themselves to tap into RSBs and the informal economy. According to Piggy, the biggest winner in this regard has been Cassava Smartech Zimbabwe through the Ecocash payments platform. While there has been some negative news flow relating to compliance issues, Ecocash remains the widely accepted digital payment option supporting the drive towards a cash-lite society (+8.0 million registered customers covering +80% of Zimbabwe’s adult population). Other financial services groups like NMBZ have also put in place strategies centered on tapping into the informal economy by targeting SMEs (small to medium sized businesses).NMBZ has been rolling out Tap Cards and mPOS machines (a smaller version of POS machines) for SMEs and the informal sector, enabling the group to tap into the mass market. All in all, Piggy believes NMBZ and Cassava are well placed.
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