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Zim’s Economy Trapped In Catch-22 As Government Cracks down On Private Sector

Government must deal with the root cause, fiscal and Monetary policies conflicting each other…

By Shingirai Vambe

Zimbabwe’s economy has been struggling for years, with a crippling unemployment rate that has left many relying on the private sector for survival. Ironically, the government, which also benefits from the proceeds of the privately-run economy, has now turned its attention to this very lifeline, imposing stringent regulations and taxes that threaten to stifle the private sector’s growth.

This blitz has left many wondering about the government’s motives and the potential consequences of its actions. With the private sector serving as the backbone of the economy, providing essential services and driving innovation, it’s puzzling that the government would choose to target it ¹.

The government’s actions are not only affecting the private sector but also having a ripple effect on the entire economy. With high taxes and regulatory hurdles, businesses are finding it increasingly difficult to operate, leading to reduced investment, decreased productivity, and ultimately, more unemployment. However, Informal traders vowed to fight back as they accused authorities of being divorced from economic realities that drive ordinary people into vending to make a living.

Local Authorities, Zimbabwe republic Police (ZRP), Zimbabwe Revenue Authority (ZIMRA), Standards Association of Zimbabwe (SAZ) and Consumer Council of Zimbabwe (CCZ) have joined forces against cross border traders and businesses operating in Zimbabwe, checking on a number of compliance requirements, quality and if imported, the goods must be having an import duty receipt, with local authorities also following up on operators licenses. the operation has been widely condemned as it threatens the day to day living of majority of the citizens.

The struggle which is vividly being noticed with big retail shops closing due to the volatile economic landscape, will lead many to be homeless with no capacity of paying rentals, putting food on the table let alone a formal employment which many graduates leaving school had found refugee, in supermarkets, restaurants, boutiques and some being second hand clothes merchandisers.

Earlier the show of force was noticed on second hand clothes, which flooded the streets of all the 10 provinces business districts, a business that has slowly led to the closure of a gap created by many clothing shops that could not stand the economic pressure. Very few Zimbabweans, serve for civil servants, can manage to buy clothes in bigger clothing shops like Topics, Edgars to mention just a few, citizens have resorted to second hand clothes from Mozambique, which they can afford and appreciate in quality as a result of poor salaries.

Economic Analyst, Professor Gift Mugano, told the Post On Sunday that these are signs of poor governance policies, showing the results of a crisis in politics in Zimbabwe.

“As the economic situation in Zimbabwe continues to deteriorate, citizens are finding themselves with limited options and an increasingly heavy financial burden. One of the most significant challenges facing many Zimbabweans is the rising cost of living, particularly when it comes to housing and transportation. Property owners, seeking to maintain their profit margins in the face of high inflation and economic uncertainty, have increased rentals, leaving many tenants struggling to make ends meet. This has resulted in a situation where many individuals and families are being forced to allocate an increasingly large portion of their income towards housing, leaving them with limited funds for other essential expenses,” said Mugano.

 

Compounding this issue is the fact that local councils have also increased operators’ licenses, despite the decrease in income experienced by many businesses and individuals due to economic pressure and high inflation. This move has been widely criticized, as it adds an additional financial burden to already struggling businesses and individuals. The impact of these increases is being felt across the country, with many Zimbabweans expressing frustration and desperation at the lack of affordable options. The situation is particularly dire for low-income households, who are often forced to make difficult choices between essential expenses, such as housing, food, and healthcare.

Dzivarasekwa member of Parliament, Edwin Mushoriwa, Public Accounts Committee Chairperson, told this publication that the fiscal regime that the country is facing is caused by the inflow of money into treasury. “There is a mismatch on the monetary policy and fiscal policy which is cheaper for informal sector, inconsistent of policies, informal business has taken over, Government was supposed to deal with this case from a grassroot level,” added Mushoriwa.

Government remain a major employer, when formal business start to collapse people resort to the informal sector the government need to deal with the root cause. However, mushoriwa said the inhibitive standards requirements of many licenses on top of high cost of manufacturing local goods and that alone has destroyed investor confidence in the country, promoting importation and smuggling of basic commodities competing into the market.

He said 30 percent of the goods in the market have been smuggled into the country, which is a huge bearing for treasury in terms of revenue collection, Government need to address its finance management system.

An entrepreneur in Rusape, who refused to be named said the measure is very correct, but the manner at which they are enforcing is wrong, they are supposed to do these routine check so as to protect the consumers and the government. for years Government has been losing a lot of revenue through smuggling which has also created and promoted corruption at points of entry and their approach of making it a blitz is not enough neither a good thing in our society, we need to do business upright he said.

As a result, some products have vanished on shelves while prices of other products have gone up due to scarcity, tight security and cost of importing. fears are that people will pay good money on sub-standard goods likened with the Chinese products in the market.

Local businesses have lashed out on the cost of producing goods local in Zimbabwe, with continuous load shedding,  high taxes and operating costs. the Government issue policies and enforce the use of local currency when the economy has completely dollarized, creating a volatile exchange rate with the trading currency. the puzzle question those who post annual profits under the circumstances.