Zimbabwe’s formal businesses which are being pushed to the limits by the informal sector, say they are engaging the authorities to force the unregistered entities to comply with the country’s laws, the Confederation of Zimbabwe Retailers (CZR) has said.
CZR president, Denford Mutashu, told Business Times that the confederation will ensure sanity prevails in the informal businesses as they lack proper contracts for workers, give pittance, and lack basic ablution facilities.
“The informal traders do not pay taxes, do not have licenses and they also pay workers any amount because they do not work following the demands of the Labour Act but this is about to change as we will push to ensure they comply with some of the taxation legislation,” Mutashu said.
“Their workers are given poor salaries as they receive the same salaries as the maids and gardeners; something has to be done to ensure that they have a standard salary cap that governs them.
“They are the ones who wholly get the untaxed US$ but they don’t have the basic ablution facilities causing unhygienic practices,” he said.
Formal businesses had been pushed on the brink by informal businesses as suppliers favoured the informal businesses paid in US$ cash, unlike the formal entities which pay with a local currency which is vulnerable to inflation and global shocks.
Some manufacturers could even say the commodity is in short supply but could sell informal businesses at a discount because they bring US$ cash.
“The continuous increase of those who manufacture and sell goods in the informal business is seriously affecting returns on the formal businesses that are doing their businesses legally,” Mutashu said.
He said the association was engaging the government and local authorities to intervene so that the operations of formal businesses cannot continue to be affected.
If the informal business can be regularised this will lessen the competition between formal and informal businesses, he said. Retailers feared if the situation is not monitored the supply chains will be disrupted or broken resulting in the resurfacing of basic commodities black market which is not a desirable thing for the economy.
“Sometimes formal retailers are given a 30-tonne truck per month which we sell within three days of delivery. But, the tuck shops are given as many trucks as they want, depending on the cash they have.”
Retailers said they are in a catch-22 after the central bank directed formal shops to sell their goods at a premium of 10% above the official rate.
The official rate is at around ZWL$732: US$1 with shops allowed to trade at about ZWL$780 per US$1.
With the parallel market rate galloping to ZWL$1000: US$1, most manufacturers now prefer tuck shops that pay in hard currency, leaving the formal shops struggling to restock.
“The charging of goods using the official rate has a serious knock on our businesses as suppliers and manufacturers are not supplying us regularly as they don’t want the local currency. We are struggling to re-stock as they go for informal traders who have hard currency,” Mutashu said.
Added Mutashu: “It is very difficult for a supplier or manufacturer to give me a product where I am paying in ZWL$ understandably because they would also want to use their product to generate foreign currency from their internal source.”
Recently, the Consumer Council of Zimbabwe (CCZ) acting director, Rosemary Mpofu, said consumers buy from informal traders because their goods were affordable as compared to formal business.
“CCZ is receiving concerns from big retailers who are saying that their businesses have been affected by the mushrooming of informal traders in front of their premises but from our understanding consumers want affordable goods,” Mpofu argued.