Nelson Gahadza, Senior Business Reporter
THE Government has been urged to incentivise informal sector enterprises, including through streamlined and simplified compliance procedures, to encourage the operators to register their businesses, economic analysts and tax experts have said.
This comes as Zimbabwe's economy has become highly informalised, with micro, small to medium enterprises (MSMEs) now accounting for approximately 86 percent of overall economic activity.
While this reflects the reality of Zimbabwe's economy, the majority of the business entities or activities in the informal sector do not pay taxes, even in instances where the law provides for such a requirement.
Speaking at the 2025 post-Budget breakfast meeting in Harare yesterday, Confederation of Zimbabwe Industries (CZI) economist Dr Conelius Dube said without incentives, it would be difficult to formalise the emerging economy.
"They have many privileges compared to formal business. This is partly due to the high cost of compliance, which in turn drives informalisation; hence authorities should do more on compliance," he said.
The post-Budget meeting was hosted by Business Weekly and CZI in partnership with the Ministry of Finance, Economic Development and Investment Promotion.
In the 2025 National Budget, Treasury proposed several tax reforms to bring the informal sector into the national taxation bracket.
It is now mandatory for MSMEs in high-volume transaction sectors such as retail, hardware, and hospitality to acquire point-of-sale (POS) systems and maintain proper financial records.
Addressing the same gathering, Mr Farai Mutambanengwe, founder and chief executive officer of the SMEs Association of Zimbabwe, said the Government should find more innovative ways to bring the informal sector into formal economic channels.
"There is deepening informalisation in the economy, but this has largely been a result of various issues such as the need for a proper market-determined exchange rate.
"People are more interested in trading money than producing, hence the informal sector continues to grow. The Government should find more innovative ways to bring the sector into formal channels," he said.
Mr Mutambanengwe said as long as the cost of compliance remained high, informality would continue, and cause the demise of more formal businesses, especially in the retail space.
Tax expert Mr David Masaya said the 2025 National Budget did not provide enough measures to reduce the cost of regulation.
He said the economy was about 86 percent informalised, and the budget widened the tax band to the informal sector to bring everyone on board.
"The requirement for a fiscal machine for all businesses will plug leakages through taxes, invoices and cash transactions. Mandatory VAT registration will also go a long way in bringing the untaxed into the tax net," Mr Mutambanengwe said.
However, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube said the informal sector was only informal to the Zimbabwe Revenue Authority (Zimra) and National Social Security Authority (NSSA) but formal to other regulators and local authorities.
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"What is lacking is the sharing of data between Zimra and the local authorities, should that happen, we can formalise the sector quickly," he said.
The Minister said through the 2025 national budget, he proposed several measures focused on MSMES to bring them into formal channels.
According to Mr Masaya, to register the business of an informal sector player, including clothing merchandisers/boutique's, car dealers, lodges and failure to comply with requirements for the compulsory use of POS machines would trigger presumptive taxes ranging from US$20 000 to US$60 000 for entities with monthly average revenue of US$1 700 to US$5 000, that is on assumed monthly profits of US$7 000 to US$20 000.
