‘ Currency reform key to ending shadow economy’

SAMANTHA MADE

Business leaders have issued a stark warning that without urgent currency reform, the country’s vast informal economy will continue to choke growth and investment.

Speaking at the Old Mutual Zimbabwe Summit, industry players said currency uncertainty was the single biggest barrier to formalisation, with some warning it accounts for “up to 75% of the nation’s economic problems.”

Chris Mugaga, Chief Executive Officer of the Zimbabwe National Chamber of Commerce (ZNCC), told delegates: “The agenda of formalization is a difficult one. It’s a currency issue. There is every incentive to remain informal as long as you don’t know the kind of money tomorrow.”

Mugaga’s comments highlight a persistent challenge, businesses remain hesitant to enter the formal economy when currency volatility erodes profits and complicates planning.

Informalisation, he added, perpetuates a cycle of financial exclusion and limits access to credit and institutional support.

Sekai Kuvarika of the Confederation of Zimbabwe Industries (CZI) echoed Mugaga’s concerns, arguing that small and micro businesses are often misunderstood. “I think that we seem to have treated smallness or infancy in our economy and in our economic activities as marginalization and vulnerability, rather than a life-cycle stage in the various business sectors or economic activity that we engage in,” she said.

Kuvarika stressed that formalisation must be incentivised rather than penalised. Small and micro enterprises face challenges such as obtaining identity, registration, and recognition without being immediately burdened by taxes or fees. “Maybe all they need is actually identity in the first place and just being able to be identified as a business or as an economic activity or actor should provide us with access and with the knowledge of how many economic activities we have and not require anything from them,” she said.

Meanwhile, Rosemary Mpofu of the Consumer Council of Zimbabwe highlighted innovative informal solutions that have emerged due to the gaps in formal financial services. She cited Mukando, a form of community-based savings and lending, as a practical example of economic ingenuity. “Mukando has produced more results than the banking sector. Mukando has produced more results for consumers than the long-term insurance services sector. It has produced more results than the pension sector,” Mpofu said.

Despite these challenges, the Reserve Bank of Zimbabwe (RBZ) has sought to reassure the public and stakeholders about the stability of the country’s banking system. RBZ Deputy Governor Dr. Innocent Matshe said the sector remains robust, with “no risk of value loss after 2030.”

Other industry voices, including the CEO Roundtable, acknowledged government efforts to improve the business environment but warned that underlying structural issues — including liquidity shortages and regulatory gaps — continue to drive informalisation. “There is no ZiG in the economy market-wide. We believe that the exchange rate is managed. This only perpetuates arbitrage and speculative tendencies,” the Roundtable said.

In response to the rising call for reform, Minister of Information, Publicity and  Broadcasting Services Jenfan Muswere announced that Cabinet had approved measures aimed at tackling informalisation and modernising payment systems, drawing on insights from a recent study visit to India.

“Based on the insights drawn from the Indian payment system and broader financial inclusion strategies, Cabinet adopted policy measures to strengthen the Government’s digital payment ecosystem and facilitate the formalisation of the informal sector,” Muswere said.

Key measures include the creation of a digital registration system for all Micro, Small, and Medium Enterprises (MSMEs) to compile a national database, reviewing payment system limits to accommodate MSMEs, and incentivising informal actors to engage with the formal banking system. Additional reforms focus on simplified Know Your Customer norms, zero-deposit basic savings accounts, no-cost digital wallets tailored for micro-enterprises, digitised licensing, and streamlined tax processes.

Muswere added that the government plans national campaigns promoting digital financial literacy, incentivising voluntary formalisation, increasing trust in payment systems, and strengthening public-private collaboration for low-cost payment infrastructure, particularly in underserved areas.

For industry leaders, these measures are a positive step, but the message remains clear: without tackling the root causes of currency instability and creating an enabling environment, Zimbabwe’s shadow economy will continue to dominate, stifling investment, growth, and employment.

“The agenda of formalisation is challenging, but if we do not address currency uncertainty and provide supportive frameworks for MSMEs, we risk entrenching informality and leaving significant economic potential untapped,” Mugaga concluded.