Zimbabwe’s economy is now heavily reliant on the informal sector, with more than three-quarters of all economic activity taking place outside official legal frameworks.
This revelation comes from the country’s first-ever economic census, which paints a stark picture of how dominant informal businesses have become.
According to a report released Wednesday by the Zimbabwe National Statistics Agency, informal businesses have “increasingly become a significant source of livelihoods,” yet their contribution to government revenue remains minimal due to widespread non-compliance with the formal tax system.
The Confederation of Zimbabwe Industries (CZI), the country’s leading industry body, has described the situation as a “critical risk” to the economy.
“Formal businesses are being squeezed,” said MacDonald Mutengo, CZI’s lead research officer, during an event.
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“Companies are not making profits, they are highly regulated.” The growth of the informal sector is largely driven by the collapse of formal job opportunities over the years.
Economic mismanagement, hyperinflation, and repeated currency devaluations have pushed many Zimbabweans to seek survival through informal means, according to Bloomberg.
The census, which surveyed over 204,798 businesses, found that wholesale and retail trade dominate the informal economy, accounting for 73% of its activity.
Manufacturing is a distant second at 8%. Bulawayo stands out among Zimbabwe’s provinces with the highest concentration of formal businesses, at 40%.
In contrast, most other provinces have less than 30% of businesses operating within the formal economy. This trend isn’t unique to Zimbabwe.
In Kenya, the informal sector employs 83.6% of the workforce, around 17.4 million people, according to a 2024 report by the Kenya National Bureau of Statistics.
It also accounted for 703,700 new jobs, or 90% of all non-agricultural employment created. Nigeria’s informal economy also dominates.
A report by Moniepoint reveals that 89.4% of Micro, Small, and Medium Enterprises (MSMEs) operate informally.
However, unlike Zimbabwe, an estimated 89% of Nigeria’s informal businesses reportedly pay some form of tax, a sign that effective taxation of this sector is achievable if properly managed.
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Image Credit: Business Insider
