For as long as I can remember, street vendors have been part and parcel of Zimbabwe’s economy. In the city where I live (Gweru), the streets are flooded with people trying to make a business of their own and capitalizing on local trends. Any Zimbabwean who has been around long enough will tell you of the infamous ‘Jack Sparrow’, a shadow personality who sold pirated movies in Zimbabwe. His movies found their way into households all over Zimbabwe. Piracy became a booming (yet illegal) industry. Monitoring piracy was very scarce at the time. This created an avenue for street vendors to sell movies and TV series to customers. Prior to this, they were ‘burning’ the latest albums onto CDs to sell to customers (though again, illegally). In a country that has experienced rapid deindustrialization and hyperinflationfor more than a decade, street vending and informal trading, amongst other alternative avenues, has become the only method of survival for thousands of Zimbabweans.
Zimbabwe has been termed an ‘informal economy’. By this we mean that an overwhelming proportion of Zimbabweans do not have formal sector employment. They are not employees of the private or public sector with a salary, pension or any other social welfare benefits. Rather, they are street vendors, street traders, communal agricultural farmers and owners of relatively small or family businesses. In an article written by the New York Times, they estimated that by 2014, 94% of the Zimbabwean workforce were from the informal economy. This same statistic was cited by the solidarity center in 2016. It is difficult to say where the statistic stands now in 2020, but there is very little reason to doubt it has changed. Why then, is such a huge proportion of the Zimbabwean workforce in the informal sector?
Several authors link the origins of the growth of the informal sector in Zimbabwe to the Economic Structural Adjustment Programme (ESAP) that was kick-started in the 1990s. The Zimbabwean government had launched a fully-fledged IMF and World Bank-monitored programme of economic structural adjustment which aimed to deregulate the domestic economy (prices, employment and wages), reduce the public deficit, and relax restrictions on trade. As was the case in other African countries, the ESAP signaled a formal shift away from state interventionism and regulation toward non-interventionism, privatization and deregulation. However, unfortunately, rather than stimulate growth, an economic crisis soon followed. The reasons for this economic crisis are debatable. Some authors point to the combined effects of the ESAP, which negatively affected Zimbabwe, and the droughts that occurred in the 1990s. The 1991-92 drought was probably the worst to that date. The economic crisis that followed had several consequences. Important for our concerns is the effect it had on employment and wages. Data suggests that unemployment skyrocketed from approximately 10% in the mid-1980s to approx. 20% after 1990, with slightly higher rates in urban areas. Formal sector job creation slowed down, and the relaxation of government regulation on labor markets under the ESAP allowed employers to lay off employees quickly without much due process. As a result of this, the informal sector began to boom .
Between the period of 2000 and 2007, a recession was looming. This period was characterized by food shortages, economic hardship and shutting down of several companies. An economic crisis then swept across the country in 2008. By 2008, the informal sector was absorbing 70% of the labor force. The economic, political and social decline in the country had a marked effect on formal employment remuneration. Hyperinflation reduced salaries, while civil servants and factory workers failed to get their salaries from the banks. Bank queues were increasing rapidly. This made the informal sector an attractive option for those in formal employment. The daily increase in transport fares, accommodation costs and prices in food further increased the attractiveness of the option. Moreover, the education system was near collapse, with an estimated 45,000 teachers leaving the profession since 2004. In order to survive, many youths transformed themselves into occasional traders. In Gweru, they became the people we saw on a regular basis on every corner selling whatever they could. I particularly remember how on weekends portions of the streets were closed off and became a flea market of some sort. People would sell whatever they could throughout the day. My father and I would often drive deep into the industrial side of town to where street vendors were located to buy vegetables. They had all set up stalls close to each other, and would often shout “dollar for two” as you drove by.
Mobile phone companies also began increasing the amount of street vendors they placed on the street corners as urban by-laws were relaxed. Several thousands of youths began taking part in the industry as the mobile phone market started booming. In Gweru at the time, you would be hard-pressed not to find a cell phone and repair shop on every block in the city. ‘Fake phones’ began making waves as well. The G-Tide, dual sim card phones and several other types of phones entered the market. Further, the foreign currency parallel market started booming as the banking sector began to collapse. Zimbabwe introduced a multi-currency system that allowed people to purchase goods using currencies such as the US Dollar and the Rand. Street vendors, prepaid card dealers and the banking sector had allegedly reached a mutual understanding at the time. This allowed the parallel market to flourish. In Gweru at the time, you always had a rough idea of where you could find airtime and forex traders. They all had their particular street corners where they would conduct their trading.
Currently, Zimbabwe’s economy runs on two different currencies: the US Dollar, and what has been termed the RTGS Dollar. The RTGS dollar is the official currency of Zimbabwe, and is a combination of the bond note, bank deposits and mobile money such as EcoCash. Generally, the RTGS Dollar is not a stable currency as the exchange rate fluctuates on a regular basis. The parallel market will only continue growing in Zimbabwe as people scramble for the US Dollar (the stronger currency), especially after the effects of COVID19 reverberate across the formal economy.
All of these factors put together made the informal sector more viable than ever. As we neared 2014, the percentage of Zimbabweans in the informal sector reached 94%, thus giving birth to the informal economy that has characterized Zimbabwe for several years.
A New Crisis
Zimbabwe’s informal economy has faced major threats in recent years. For example, Operation Murambatsvina (‘Drive out the Trash’ or ‘Restore Order’) that was initiated by the government in 2005. The industry has continued to thrive and evolve despite such obstacles. However, in 2020, the informal economy faces a new threat that is unprecedented: COVID19.
The health hazards posed by COVID19 has forced the Zimbabwean government to initiate a lockdown in the country that has led to the closing of many businesses and operations and people staying at home for the foreseeable future. It has also led to the closing down of the Zimbabwean border to everyone except the freight industry among others (although this situation might change very quickly). The potential further spread of the virus is also uncertain, which could affect policy responses from both the Zimbabwean and South African government. The threat that this pandemic poses on the informal sector is very clear. Street vendors and informal traders depend upon consistent face-to-face interactions with customers. Those that sell food products rely on cross-border trading in order to be able to keep their supplies intact. They do not receive a salary from any employer, and are not guaranteed any employment benefits, sick leave or pension. Further, their ability to withdraw loans from banks is much more difficult than other forms of businesses. A long enduring pandemic could potentially cripple the industry and leave it in limbo for the foreseeable future. Given that more than 90% of Zimbabweans work in the informal sector, the consequences could be catastrophic. In addition to this, if the pandemic persists, it could cripple small & medium business entities and lead to more layoffs. It is possible that this could trigger a further exodus of Zimbabwe’s workforce involuntarily into the informal sector. The hallmarks of this increase might be reminiscent of the 1990s.
Because of the uncertainty of the effects of the pandemic and how long it will last, it is difficult to say what are the best policy options moving forward, and whether the pandemic truly will cripple Zimbabwe’s informal economy. What remains true nevertheless is that policy responses from the Zimbabwean government must look different to those from other parts of the globe.The United States has rolled out stimulus packages to help small and medium business entities weather the storm. A similar policy has been initiated in South Africa through the SME Debt Relief Fund. The question for Zimbabwe must be how to weather the storm for the average street vendor, informal trader, and for families that rely on their family businesses for survival.
Conclusion: What Next?
In conclusion, the informal economy in Zimbabwe has seen its fair share of obstacles over the years, and with each time it evolved to meet the status quo. What makes the COVID-19 pandemic unique is the fact that the informal sector cannot simply just expand into another market. Social distancing and lockdown regulations has made the mere performance of informal trading close to impossible. Furthermore, finding ways to cater for those who work in the informal sector no doubt will be a complex and difficult process, because it incorporates millions of people. Which is why the effects of the pandemic will be a huge cause of concern in Zimbabwe. Two possible futures lay before Zimbabwe’s informal economy: it is either COVID-19 and lockdown regulations will cripple the sector and push Zimbabweans to find some other way to survive; or, the informal economy will evolve to meet current threats, and only expand even more due to the effects of the pandemic on the formal sector. The latter is the more likely future. As Zimbabwe continues to struggle economically, the prospects of formal job creation remain slim. Therefore, the formal sector unfortunately cannot provide a life-buoy for those in the informal economy. If anything, many more people in the formal economy will jump ship, and join in on the continued evolution of this sector.