Category: News

Formalisation is having the business registered with any government agency and a process whereby workers are organised into worker associations and/or trade unions. It also goes beyond the mainstreaming of economic activities in the informal economy into the formal economy, thus, it takes into account the reduction of decent work deficits.

“Formalisation should not be a forced task but an enabler for those who would like to grow beyond their survivalist state,” said Nyasha Muchichwa while presenting a paper at a workshop held at Jameson Hotel in Harare on Friday that was organised by LEDRIZ in conjunction with Friedrich Ebert Stiftung (FES), aimed at discussing strategies for transitioning the informal economy to formalisation in Zimbabwe.

Throughout the Economic Structural Adjustment Programme (Esap) period from 1991 to 1996, the informal economy continued to expand as more workers continued to lose their jobs and those that were able to keep their jobs had to supplement their incomes from informal economy activities, due to the fall in real income.

Statutory Instrument (SI) 216 of 1994 effectively legalised non-residential activities in residential areas. Many activities such as hairdressing, tailoring, book-binding, wood or stone carving were deregulated. Similarly, small and medium enterprises employing 5-10 people in such areas as welding, carpentry, shoe repair and small-scale car repair were accorded special consent.

SI 216 provided an excuse for local authorities to turn a blind eye to the explosion of the informal economy.

Muchichwa said the last decade has seen an increase in the recognition of quality (decent) employment creation as the key link between growth and poverty reduction but added that economic growth alone is not enough to reduce poverty and informality.

“The quality of employment created is also critical, as the incidence of working poverty indicates. J Heintz and R Pollin (2005), in their analysis of 20 developing countries noted that increasing economic growth can reduce the rate at which informalisation is growing, though it cannot on its own create an environment where informalisation actually declines.

“It is therefore imperative that Zimbabwe ensures that employment policies become central and macroeconomic frameworks are re-oriented towards creating employment,” he said.

On June 1, 2010 the government adopted the National Employment Policy framework, which puts employment at the centre of all policies. However, it is yet to be activated and fully mainstreamed in all national and sectorial policies, even though it is key to ensuring decent employment.

Muchichwa said that there is need to ensure that the informal economy as a whole is covered both in law and practice by formal arrangements. He said as a member of the International Labour Organisation, the government can use International Labour Standards to effect this, as they provide guidance on the application of rights at national level and are designed to be adapted to local contexts.

Bringing informal workers and enterprises under the protection of the law would be a major step forward to moving out of informality and towards decent work.

The government was urged to amplify the registration and implement progressive taxation for MSMEs; establish codes of conduct for the employment of workers in the informal economy; improve labour inspection and new approaches to formalisation; ensure greater respect for the law, including extending labour protection to unprotected sectors, and establish a national board to set minimum wages for the informal economy similar to the National Wages and Salaries Board, which sets wages for domestic and unclassified workers.

It was noted that many of those involved in the informal economy are unorganised and/or poorly represented in social dialogue mechanisms.

“Informal workers in Zimbabwe have no platform that allows them to participate in the national dialogue processes.

“Although the current labour law reform and set-up of the Tripartite Negotiating Forum Bill covers the inclusion of other actors as and when necessary, there is still need to ensure all those working in the informal economy have a voice and a place to air their views at all levels of dialogue. Social dialogue must underpin all policymaking on the informal economy.”

Government has a key role in creating an enabling framework for social dialogue, establishing freedom of association and creating social dialogue platforms at different levels.

In terms of representative voice, the working poor were urged to be organised into membership-based organisations that can participate in relevant policy-making and rule-setting bodies or processes.

They need legal identity and rights as workers, entrepreneurs and asset-holders. For them to gain official visibility in policy-making, their activities, enterprises and contributions should be measured and valued through provision of appropriate data.

A research by LEDRIZ established that labour market discrimination pushes many vulnerable groups into the informal economy, and, as a result, women, youth and people living with disability are often clustered in its most marginalised segments.

As mitigation, a pro-poor and inclusive approach to these and other marginalised groups will enable them to enjoy their rights and have opportunities for productive, formal work.
Muchichwa said policymaking will also require a gender lens in order to better understand the different needs and constraints of women and men.

“The government has set up two ministries to target these vulnerable groups — the Ministry of Women Affairs, Gender and Community Development and the Ministry of Youth, Indigenisation and Economic Empowerment — but they are inadequately resourced.

“As it is their role to ensure that marginalised and vulnerable groups are equipped with skills, knowledge and opportunities to participate in the development of the country, they must be allocated more funding,” Muchichwa said.

A PLETHORA of hurdles stand in the way of efforts aimed at strengthening and developing a culture of transparency and accountability in the country’s banking sector.

BY BYRON MUTINGWENDE

A policy dialogue facilitated by Transparency International Zimbabwe (TIZ)’s Ethics and Accountability Forum in conjunction with Southern African Political Economies (Sapes) Trust last week identified the way in which individuals are held to account for their actions, quality of disclosure of information and creditworthiness as some of benchmarks that can be used to gauge transparency and accountability within the banking sector.

The discussion was informed by the fact that the Zimbabwean banking sector is currently emerging from a tumultuous period characterised by massive bank failures.

“Altogether, more than 17 financial institutions were either closed or placed under curatorship between 2001 and 2008. Notably, a general striking feature of the failure of most indigenous banks shows poor corporate governance and overindulgence of insider loans,” said Jabusile Sibanda, a senior policy advisor with TIZ.

“For example, according to the Reserve Bank of Zimbabwe (RBZ) report on the failure of Renaissance Merchant Bank in 2011, the collapse of the bank was the biggest pillaging scandal where the bank owners, working in cahoots with a pliant management, looted the bank to a shell. In addition, a total of six banks — AfrAsia Bank Zimbabwe, Interfin, Trust Bank, Allied Bank, Capital Bank and Royal Bank — have closed operations since dollarisation in 2009 due to poor governance structure and bad loan books.”

Sibanda said the abuse of depositors’ funds through Non-Performing Insider Loans (NPIL) remained the greatest scourge accounting for the hemorrhaging of indigenous banks.

He also noted that the consequences have been devastating with those responsible for the pillaging of the banks not made to account for their actions and depositors losing their hard earned servings without compensation.

To date, it is estimated that $7 billion is currently circulating outside the formal banking system. The situation contributes to low savings that are critical for investment mobilisation and stimulating economic growth especially for a country such as Zimbabwe battling with low manufacturing and industrial capacity utilisation.

An economist with Labour and Economic Research Institute of Zimbabwe (LEDRIZ), Prosper Chitambara said that the stability of banks was threatened by a number of factors that were averse to transparency and accountability.

“While profitability in the banking sector remains strong, stability has been weakened by high levels of non-performing loans…This has exerted pressure on the banks’ balance sheets with adverse effects on their lending operations. The reduction in total core capital is largely attributed to loan loss provisions and subdued earnings performance by some banking institutions,” he said.

“The factors accounting for high levels of non-performing loans (NPLs) include poor corporate governance; inadequate disclosure and lack of transparency; critical gaps in regulatory framework and regulations; inadequate supervision and enforcement, weaknesses within the Reserve Bank of Zimbabwe (RBZ) and weaknesses in the micro and macro environment.”

Chitambara said the high cost of doing business in Zimbabwe has affected the cost of banking, thereby discouraging people from depositing money into the banking sector. Another challenge was to do with corporate governance issues.

“The world over, financial crises are a product of severe corporate governance failure in the banking sector. In most cases, the boards of several financial institutions were found to have been unable to either monitor risk management systems and executives’ salaries or guard against conflicts of interest,” he said.

He called for the application of strict fit-and-proper rules for directors and controlling shareholders, underpinned by periodic board evaluations as well as implementation of stricter related party lending regulations.

Chitambara observed that banks’ executive remuneration should be linked to performance and risk exposure and make bonuses contingent on long term sustainable outcomes.

“To improve transparency and accountability, the Zimbabwean banking sector should introduce a financial stability oversight council. This helps create collective accountability for identifying roles and responding to emerging threats to financial stability,” he said.

Bankers’ Association of Zimbabwe president, Sam Malaba admitted that the banking sector has had its fair share of corporate governance deficiencies, which have resulted in bank failures.

He said that the eight indigenous banks, which closed, failed due to corporate governance malpractices.

Malaba decried shareholders and senior management of banks who abused their positions using depositors’ funds for personal gains as insider loans without collateral security.

“Some examples of unethical practices include abuse of associate companies and or related parties to enable banks to venture into non-banking activities and to channel depositors’ funds to non-regulated entities such as asset management or investment companies,” he said.

Despite the challenges, Malaba said the banking sector has implemented significant reform measures that have addressed banking sector vulnerability and confidence. He said the success of the reforms hinged on cooperation, engagement and collaborative effort between the central bank and banks.

Phineas Kadenge, chairman and senior lecturer in the department of economics at the University of Zimbabwe, said there was need to come up with stress tests to determine capital strength of financial institutions so as to avoid banks going under in times of shocks and improve their stability.

WASHINGTON DC—

The Reserve Bank of Zimbabwe has rolled out special coins designed to ease change problems that have been faced by members of the public in the country since the introduction of multiple currencies in 2009.

According to the Chinese news agency, Xinhua and the Consumer Council of Zimbabwe (CCZ), the central bank on Wednesday evening unveiled the coins minted in South Africa, to some stakeholders including consumer groups, retailers and various entities.

CCZ director Rosemary Siyachitema says the RBZ has indicated that the special coins that are indexed at par with the United States coins, will be distributed in the country soon.

Siyachitema said the coins, printed at a cost of $50 million, are expected to be warmly welcomed by members of the public.

RBZ officials were not available for comment as they were said to be busy engaging various stakeholders on the use of the coins.

Economist Godfrey Kanyenze of the Labour and Economic Development Research Institute of Zimbabwe says the rolling out of the coins was long overdue.