The government should step up efforts to formalise the informal sector and promote financial inclusion as liquidity constraints continue to beset the economy, experts have said.
BY BUSINESS REPORTER
The economy has in recent months been hit by cash shortages triggered by low exports in the wake of rising imports.
National Informal Economy Network spokesperson Promise Mkwananzi said his organisation has been encouraging its members to move to the formal sector but indications were that they would not be able to access their funds because of the current cash crisis, which has seen banks putting a cap on withdrawals.
“Our clients use banks so we are affected by the cash crisis and efforts towards formalisation becomes difficult under these circumstances,” he said.
The country has over 70% of the population employed in the informal sector with an estimated $7 billion circulating in that sector.
The informal sector constitutes most of the unbanked people in society and the Reserve Bank of Zimbabwe has been urging banks to tap into the informal sector under the financial inclusion strategy.
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National Vendors Union of Zimbabwe board chairperson Sten Zvorwadza said the vendors had suffered a big blow due to the cash crisis as the customer base was shrinking.
“We are finding ourselves in a worse situation as the little that we make is taken by the police even from organised selling points,” he said.
“We had opened accounts with certain banks, which were deposit-free and we were already getting into formal banking but we have stopped because we might not be able to access our cash.”
Zvorwadza said since few people were accessing their money from the banks, they had witnessed reduced spending from the customers’ side.
He said the informal sector used money from informal money markets such as Copacabana, Road Port in Harare and other markets.
Zvorwadza said the markets were run by individuals that were known to keep cash in their homes.
“We are now using the parallel informal financial markets, which are our plan B or fall back plan at the moment as cash crisis persists,” he said.
Confederation of Zimbabwe Retailers president Denford Mutashu said the cash crisis was affecting the operations of retailers as some transactions were taking more than 48hours to be processed.
“What we would want to see happening is that the public should start to use plastic money but that has not received a high uptake locally yet in the region and in Europe people use plastic money,” he said.
Mutashu said retailers hoped the funds from African Export Import Bank (Afreximbank) would help ease the liquidity challenges in the economy.
RBZ and Afreximbank are working on a nostro fund to stabilise the liquidity situation that has haunted the market every month-end.
Finance minister Patrick Chinamasa told journalists at a press conference on Friday that the demonitisation of the Zimbabwe dollar and cash budgeting on the backdrop of weakening exports had exacerbated the liquidity problem.
“We are a unique country which uses the United States dollars, which is a foreign currency but we use it as a domestic currency,” he said.
“Some of the challenges are that the foreign currency is used to buy mazhanje (wild fruit) and tomatoes. “We don’t print the US$, we are a cash economy and when people are paid their salaries, they withdraw all their money but they still expect to get cash from the bank.”
The cash crisis has also been worsened by the huge import bill that amounts to close to $20 billion since the country dollarised in 2009.
The challenges being faced by the manufacturing sector has made it difficult for the companies to produce because of high production costs. The sector has also suffered from cheap imports from the region.
