Vending Crisis: Commandist approach not the solution

From Informal to Formal
Commandist approaches not the solution …
A Critic of Government Response to the Vending Crisis

By Tendai Muchada

It has become widely accepted that Zimbabwe is being driven by an informal economy which has contributed to the death of industry.

From the lenses of an ordinary citizen, mere observation tells us that more than 60% of people living in urban areas particularly in Harare are largely dependent on vending and at least one in every four people is a direct beneficiary of vending.

Given this baseline, government has been called to act due to the pinch that has been felt by the formal economy in a bid to try and resuscitate profit amid adverse effects stemming from the informal players who are running a parallel economy without due regard to the law.

I am particularly interested in conceptualising the term law which will I qualify as good law and bad law. My simple qualification of law within the realm of the informal economy borrows from Hernando Do Soto who posits that “a law is ‘good’ if it guarantees and promotes economic efficiency and ‘bad’ if it impedes or disrupts it.

The unnecessary costs of formality derive fundamentally from a bad law; the costs of informality result from the absence of a good law”. It is against this background that in this brief, I endeavour to analyse the laws that govern formality and local economic development, whilst paying particular attention to the political economy of the informal sector.

The issue of vending is a mere semblance of the current macroeconomic environment which is characterised by a high liquidity crisis. The tragedy of the Zimbabwean case is that the informal sector saga has solutions that come from different lenses whose political DNA ranges from the left to the right.

I advance the thesis that there are state-centric and civic- centric analyses and solutions to the issue of the spiralling informal sector. State-centric views accommodate solutions that entail the roping in the of the military junta, giving deadlines, convening round tables with questionable stakeholders who appear to be of different backgrounds but realistically come from the same political umbilical cord.

Civic driven solutions in my view are more market driven and generally liberal in nature hence they collude with the states goal in that the face of the state is backed by a solid revolutionary party with a keen interest in social base retention. Beyond analysing the solutions, suffice to say that it is imperative to locate at which point the solution to the issue of informality should emanate paying particular attention to centre-local relations.

I will begin by acknowledging the role of local authorities [government] in advancing local economic development. Local authorities by their very nature are the custodians and regulators of much of the informal activity that takes place within their geographical jurisdiction.

However, in a country that has been taken over by the informal sector, I am still to learn how local authorities can effectively deal with illegal vending [as it is called]. To date, local authorities are faced with three problems within the informal sector that is informal trading, informal housing and information public transportation.

The very same local authorities are failing to pay their salaries and one of their cost cutting measures has been to lay off part of their staff. These strategies come in the face of a growing informal sector which needs adequate manpower beyond the good [by] law for order to take precedence.

From the states perspective, I believe that it has the capacity to create good law that promotes business efficiency and a conducive business environment that is all encompassing. The problem Zimbabwe is faced with is that all facets of the country is politics.

Now, when everything has been politicised, the direct output of such an arrangement is the creation of powerful elite coalitions which put restrictions on the majority. These coalitions, legislate laws that do not promote property rights and increase bureaucracy.

An example is the number of days it takes to register and establish a company in Zimbabwe and the amount it costs. From my research, I have gone to learn that you need an average of $200 to register a company which can take up to two months until final registration.

I think of this from the lenses of an informal dealer who is able to spin that same amount twice or thrice in the same period. De Soto (1990) in his analysis of the informal sector in Peru argues that “street vendors have low productivity because they offer only a limited range of goods and services.

The street vendor’s business is further hampered by the inability to offer any customer-related services or any credit. Furthermore, their business exists without any proper storage mechanisms or safety systems. These restrictions have led to the creation of informal markets”.

I borrow from this classic explanation of the state of the informal sector in Peru because it is no different from the Zimbabwean case which is 15 years older than the example. It is my belief that government must address the issue of property rights for the informal sector.

However, this must not be done in isolation of market profits. Government’s response has been targeted at the vendors alone without attempting to “cause” in increase on the market foot print. Government must expand markets beyond the confines of its CBD which will automatically shift informal activity making it easier for regulation to formality.

A classical example is the shift of car sales, vendors and other informal activities which have been formalised in various tobacco auction floors. The same framework can be done by government. I know many may say why can’t local authorities take up this task, but I maintain that capital project like these are better done by government which has agencies and funds like the PSIP.

There are two fundamental things that government and local government must embrace in order to fully respond to the growing informal sector which is globalization and the technology revolution. The world’s global market has opened its doors and the global economy is functioning at full throttle.

Zimbabwe has not been spared from the effects of globalization and how it is going to respond will only spell the trajectory of its GDP. The advent of the Chinese dollar for 2 has been an eye opener for the poor majority who live below the poverty datum line and has stepped on the toes of our conventional market giants.

Were I used to spend 20 dollars on a jacket; one can spend 2 dollars without waiting in a queue or opening an account and being bothered by monthly interest infested statements.

These effects need serious and sober policy reflections which border around regularising and formalising the informal sector to promote fair business competition and for government to get revenue from this sector. Technology has seen the advent of mobile money which is coming at a time when banks are closing in people’s funds which is a serious factor in terms of money storage.

It is against this background that I argue that government response of using soldiers and giving ultimatums is not sustainable.

It came not as a surprise when vendor’s symmetrically gave government a 7 day ultimatum to open industry and create jobs because this is the real reason why they are in the street which is why I maintain that there is need for a serious dialogue which goes beyond the political pillars of the ZANU PF government.

The problem is at the domain of central government hence government likewise has the potential to create an avenue towards solving this problem through a multiple stakeholder approach.

The reason why I posit this is because our current government has been captured by the revolutionary party which has its own interests in the game of thrones. To analyse ZANU PF’s interests, one needs to understand the manner in which ZANU PF has been able to return control of urban settlements.

Whilst the ZANU PF government appears to be against illegal vendors, we must all turn our attention to Mbare, Harare East, Highfields and Harare south. These areas amongst many are defined by informal trading and housing.

The political economy of informal trading and housing has been largely defined by politics of patronage which has been very instrumental in micro management of the social base within these areas. At the end of it all, ZANU PF has a data base which it can reliably boast of because of the economic hardships which it is countering through empowerment by informalization.

In conclusion, going towards the solution needs a well mobilised and acute civil society and business sector working together with government [cognizant of its party background] beyond political boundaries.

However I can bracket my solution to be effective in a country that is in a normal state of affairs but I maintain that we need good laws that will promote efficient business practices and the formalisation of the informal.

The commandist approach to solving this crisis will not solve the problem at hand because the problem has spread beyond the horizons of the naked eye making it impossible for an article like this to spell out a comprehensive solution.

All interested stakeholders need to converge in national dialogue with an objective of coming up with good laws and policies that will spell the beginning of formalising the informal sector.

Tendai Muchada
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