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World Bank calls on Zimbabwe to incentivise formalisation

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By Alois Vinga


A recent study published by the World Bank has called on Zimbabwe to incentivise formally registered companies on the back of addressing challenges to spur private sector productivity.

Zimbabwe is rated among the world’s five highly informalised economies – a situation which local private sector dealers say is a setback due to unfair competition.

The global financier’s study titled Zimbabwe Country Private Sector Diagnostic reads: “Disincentives to formalization include a cumbersome and costly regulatory framework to start and operate a business, including outdated licensing legislation. The large informal sector reduces the overall productivity of the economy and creates unfair competition for formal firms.

“Inconsistency of business environment policies, cumbersome licensing and taxation systems, and overlapping requirements at national and local levels significantly increase the cost of compliance for firms, thus perpetuating informality.”

The study notes that sector-specific policies and regulations are inconsistent, especially in mining and agriculture, and often include discretionary provisions, thus increasing uncertainty and reducing the attractiveness of sectors for FDI.

The study observes that while the agricultural sector continues to retain a sizeable share of production and employment in the economy and the bulk of lending, with significant government support and intervention, the level of productivity in the sector is the lowest across the economy, especially for food crops, with only tobacco and cotton demonstrating relatively high productivity.

Added the World Bank report, “It will be essential for Zimbabwe to address these and other bottlenecks as a priority if the country is to fully harness the potential of its private sector and steer it toward better development outcomes.”