Govt to Formalise Informal Sector

Oscar J Jeke

Zim Now Reporter

The Zimbabwean government has announced plans to formalize the country’s vast informal sector in an effort to streamline business operations and enhance revenue collection. The initiative, revealed this week, includes simplified registration processes and mandatory licensing through reforms to the Shop Licensing Act.

As part of the formalization drive, all businesses will be required to use Point of Sale machines, marking a significant shift toward electronic transactions. The government also plans to introduce a Small to Medium Enterprises Formalisation Strategy, aimed at supporting small businesses as they transition from informal to formal operations.

Speaking at a press briefing, Information, Publicity and Broadcasting Services minister, Jenfan Muswere emphasized the need for these reforms. “Our economy relies heavily on the informal sector, but this has created challenges in regulation and revenue collection. By simplifying registration and licensing, we hope to make it easier for small businesses to comply with the law while increasing economic transparency.”

The informal sector accounts for more than 60 percent of Zimbabwe's economic activity, according to the Zimbabwe National Statistics Agency. The government believes that formalizing this sector will improve tax compliance and enable businesses to access formal financial services and legal protections.

A key element of the formalization plan is the compulsory use of POS machines for all transactions. This measure aims to reduce cash transactions, which have long dominated the informal economy, making it difficult for authorities to track economic activity and collect taxes.

“Measures will also be implemented to promote electronic transactions and the development of the Small to Medium Enterprises Formalisation Strategy. It will then be compulsory for all businesses to use Point of Sale machines,” Information minister, Muswere revealed.

The government is also working on the development of the SMEs Formalisation Strategy, which will provide resources and support for small businesses to register and operate within the formal sector. The strategy aims to eliminate barriers to formalization, such as excessive licensing costs and bureaucracy, while offering incentives for businesses to comply with the new regulations.

While the formalization process is expected to benefit the economy in the long term, there are concerns about how informal traders will adapt. Some fear that the costs associated with licensing and acquiring POS machines may burden small businesses, many of which are already struggling in Zimbabwe's challenging economic environment.

The formalization plan is set to be rolled out in stages, with further details on implementation expected to be released in the coming months. The government’s goal is to integrate the informal sector into the mainstream economy, boosting revenue collection and supporting long-term economic growth.