Zimbabwe has a thriving informal economy and a struggling formal sector, with the government running budget deficits as taxes from companies nosedive. Reclining incomes in the Zimbabwean economy have worsened the plight for manufacturers, as consumers opt for cheaper but now increasingly illegal and irregular imports.
At the Beitbridge border between Zimbabwe and South Africa, more than 500 transporters cross the border daily to transport goods on behalf of traders and shop owners. Porters use bicycles while women transporters ferry goods on their heads and on their backs as they take goods across the 1.5km no-man’s-land between the two borders.
“On a good day I make 5 trips and I am paid R100 to R150 for each trip as I also help with making sure the goods pass the Zimbabwe border without paying tax. I only get my passport stamped on the Zimbabwe side,” Patricia Chironza, a Beitbridge porter said.
For the porters and other dealers who also help those without passports cross into South Africa, business is booming, although the "Buy Zimbabwe" campaign advocates say this is bleeding local companies and the economy.
On demand in Harare’s informal shops are products such as detergents, beverages, baby wear, food stuffs, clothing, hardware and furniture. Most of these products also find themselves on formal shop shelves and are transported to Harare often using buses, haulage trucks in transit or any other available means.
Willia Bonyongwe, the chairperson of the Zimbabwe Revenue Authority, said last month that there was “low consumption of excisable products such as beer and tobacco”.
Economists say that the informal nature of Zimbabwe is hurting revenue collections, with companies also overly taxed.
Bonyongwe said in a revenue update that “the depressed economy presented a significant challenge to revenue mobilisation” but highlighted that the Zimbabwean taxman was “creating a strong foundation” to collect more revenues.
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Observations show that little or no duty at all is paid for goods irregularly imported into Zimbabwe, hence they are then sold relatively cheaper compared to Zimbabwean manufactured goods. Efforts to reduce Zimbabwe’s trade deficit, however, appear to be gaining traction, with the March trade balance declining 2.36 percent on a year on year basis to $304.2 million (R4.07 billion).
Companies affected by the illegal imports of finished products include Edcon unit, Edgars, sugar producer Tongaat Hulett, beverages manufacturer Delta and foodstuff manufacturers such as Tiger Brands’ associate unit, National Foods.
Delta Corporation has complained that imports of non-alcoholic beverages from Zambia and Mozambique disrupted revenue potential in the quarter to the end of March. Under current regulations, importers require special permits to bring finished goods into Zimbabwe.
The government of President Robert Mugabe, gearing for elections next year on the back of a worsening economy, is in a dilemma; to remove informal traders and risk losing popularity or to effectively promote the formal businesses and boost the economy.
“In the end, the current situation will persist, because informal trade and business is the only mode of income for the majority of Zimbabweans who are jobless. And apart from being taxed heavily to sustain government revenues, local manufacturers also have to do with imports,” economist Johannes Kwangwari said.
Industry Minister, Mike Bimha said the government would deal with the informal traders and smuggling of finished products but analysts are sceptical.