Dear The RBZ Governor & Dr Mthuli Ncube,

-How to Win Zimbabwe’s Economy and Currency Crisis.

-LECTURE 1-

Living in the richest country in the world while enduring profound poverty is a paradox that is difficult to comprehend. Zimbabwe, a nation endowed with some of the world’s most valuable minerals, struggles economically and fails to stabilize its local currency. Explaining why such a wealthy country faces the highest inflation levels is complex, yet many economists are developing models as potential solutions to the Zimbabwean crisis. However, it is crucial to examine how the Zimbabwean economy is structured before analyzing these potential solutions. Following a deteriorating relationship with its former colonial masters, Britain, a significant portion of the general population became unemployed, leading to widespread suffering.

The government responded by introducing black empowerment laws and encouraging people to create their own jobs. Support for these initiatives was minimal, resulting in formal employment remaining a significant challenge for the government to address. Today, statistics indicate that 90% of Zimbabwe’s working population is not formally employed—a fact often overlooked when discussing employment figures.

The challenges Zimbabwe faces stem from having a working population that is informally employed. Since 2000, Zimbabwe has been cultivating a new culture of business and economic affairs. The government is now struggling to control an economy that has transitioned from formal to informal. It is unfortunate that the government is attempting to manage this informal generation through formal methods. Some politicians attribute the situation to a political crisis that has led to a leadership crisis.

However, this is a simplistic view as changing political leadership does not automatically ensure economic stability and growth—these are distinct issues. To understand the informal economy better, here are its characteristics:
– The majority of the working class is informally employed.
– Businesses are not registered.
– They have individual rather than corporate goals.
– Businesses primarily engage in buying and selling with minimal production or manufacturing.
– Most products are imported.
– Profit margins and prices are not stable but fluctuate frequently.
– Businesses lack proper bookkeeping and accounting.
– Typically, the business owner is also the employee.
– No contributions are made to pension funds.
– Businesses do not submit income tax.
– There is no insurance for businesses.
– Businesses lack collateral security for borrowing from formal banks.
– There is little to no government financial assistance.
– Skills and business management knowledge are limited.
– Forex markets are controlled independently and individually.

These issues indicate that for the economy to function normally, an informal system of control must be established. Zimbabwe’s politicians will not be able to restore the local currency unless they engage with the informal sector. There is an ongoing conflict between the government, which aims to formerly address the economy, and the informal institutions that have established businesses independently of government aid.

Here are brief suggestions on how Zimbabwe’s economy might be restored:
– The government should collaborate with money changers to find common ground for national benefit. Recruiting key figures from this sector to work for the Central Bank might seem unconventional.
– The government should also support entrepreneurs and small businesses by helping to formalize them.
– Establish regulated institutions to oversee pricing and profit margins, which should include members from both the informal sector and government officials.

It is crucial for the Government of Zimbabwe to recognize that the informal sector, which encompasses 90% of business activities in Zimbabwe, now controls more economic activities than the government itself. These businesses include vendors of airtime, Zesa tokens, and various other local enterprises.

When the government and city councils increase fees for operating licenses, they are challenging the masses who invested their hard-earned money into now-vacant offices after many white-owned companies withdrew from Zimbabwe. High rental charges by foreign and government building owners, coupled with government silence, raise questions about the support for indigenization. The recent law that restricts architectural design of commercial buildings to a few registered architects stifles competition and innovation.

Ladies and Gentlemen, I call upon the Informal Sector to Unite and Fight for their Rights!

Lecture Written and Delivered by

*Pepukai Begede (The Scribe)*