Informal sector growth impinged by corruption

Informal sector growth impinged by corruption

The upheaval sweeping through the nation of Zimbabwe comes with a new economic and political reality-the informalisation of the country’s economy. Informal trader means any person that carries on a business as a street vendor, hawker and include an employee of such person and for the purpose of this by-law, includes any person who trades in a public place.Although it is widely acknowledged that informalisation of the economy is a pattern across Africa, it is the embeddeness of corruption in Zimbabwe’s informal sector that raises an interest for Transparency International Zimbabwe TIZ.

TIZ observes that there is information gap on the compliance requirements for informal traders thus leaving them prone to extortion and bribery at the hands of local and state authorities. It is against this background that vendors are vulnerable to many forms of systematic corruption due to the requirements for stringent compliance conditions by council by-laws.This creates a scenario where the personnel from the city councils demand bribes from the vendors to evade facing the consequences of the law.

TIZ`s legal department has received complaints by vendors,that space barons,due to their connections with council staff grab most of the vending places and lease to the vendors.Informal traders are pushed into paying bribes or participating in various forms of corruption due to the high cost of complying with the requirements of the law.

Furthermore,the system of collecting of daily vending fees has loopholes.Fees are usually paid to mobile council cashiers,in some cases the traders might not have money at the time of collection.This results in the money accruing and eventually the vendor and the cashier make arrangements to pay a lesser amount,and this money is not receipted.In this way,the council loses significant revenue that can contribute overally to its coffers

TIZ believes that if the social issues affecting the informal sector are dealt with, the sector has potential to boost economic growth in Zimbabwe.Corruption issues must be tackled by all relevant stakeholders in order to alleviate the economic losses in the informal sector.People in the informal sector are already marginallised by poor working environments, unfriendly policies, limited financing and limited working space.Corruption therefore worsens the problems in the sector.TIZ recommends the following to the councils:

Reduction of the cost of compliance policy adjustments is one route that the government both at central and local level should pursue to recognize the importance of the informal sector at household and national levels.These adjustments should reduce the registration requirements and fees for informal traders. Moreso,the council should provide incentives for those that register and follow the required procedures e.g.discounts for those who are paying trading licences and also consider post-payment for vending space as opposed to pre-payment.

Electronic payment mechanisms to be put in place to ensure that funds are accounted for and avoid direct cash transactions.

Report cases of corruption for instance the use of Whatsapp is anticipated to be a viable option in terms of practicality, cost and evidence-based e.g video or audio recordings.