In a bold move to curb the growing informalization of its economy, the Zimbabwean government has announced that all informal traders will be required to use point-of-sale machines. This measure, part of a broader strategy to promote formal business practices and ensure tax compliance, was unveiled by Finance Minister Prof. Mthuli Ncube on January 31, 2025, following a high-level meeting chaired by President Emmerson Mnangagwa.
The decision comes as Zimbabwe grapples with a rising tide of informal economic activities, particularly in the retail and wholesale sectors. Despite achieving an average annual economic growth rate of 5.5% since 2021, the country has seen a troubling shift towards informal trading, exacerbated by the El-Nino induced drought in 2024, which slowed economic growth to 2% and disrupted key sectors like agriculture and electricity generation. Informal traders, often operating outside regulatory frameworks, have created an uneven playing field for formal businesses by bypassing taxes, licensing fees, and labour laws.
The mandate for point-of-sale machines is one of several measures the government has introduced to address these challenges. Other initiatives include a 5% withholding tax on non-registered Micro and Small Enterprises (MSMEs), payable to wholesalers and manufacturers, and a reduction in the VAT registration threshold to encourage more businesses to formalize. Additionally, certain goods such as beverages, dairy products, and detergents are now deemed smuggled unless sellers can provide proof of customs duty payment.
The government has also proposed further measures to enhance formalization. These include adopting international best practices on tax payment to ensure compliance, discouraging manufacturers from supplying goods directly to end users and the informal market, and establishing a Domestic Interagency Enforcement Team to ensure compliance within the informal sector. Improved collaboration between local authorities and central government in licensing and enforcement processes is also on the agenda.
Looking ahead, the Reserve Bank of Zimbabwe is expected to announce additional measures through its Monetary Policy Statement to further support market formalization. The government also plans to streamline regulatory processes and reduce the cost of doing business by eliminating duplication of work among government agencies.
In a move to bolster local industry, the government will enforce provisions of the Indigenization and Economic Empowerment Act, which reserves certain sectors for local businesses. Additional incentives will be provided through the Industrialization Fund, and government procurement will prioritize local producers and suppliers to support domestic industry.
