A recent report released by the World Bank urges Zimbabwe to offer incentives to officially registered businesses as part of efforts to overcome obstacles and boost productivity in the private sector.

Zimbabwe is recognised as one of the top five economies globally with a high degree of informality, which several local private sector dealers see as a hindrance due to the presence of unfair competition.

According to the World Bank’s study entitled ‘Zimbabwe Country Private Sector Diagnostic’: “Disincentives to formalisation include a cumbersome and costly regulatory framework to start and operate a business, including outdated licensing legislation. The large informal sector reduces the overall productivity of the economy and creates unfair competition for formal firms.

“Inconsistency of business environment policies, cumbersome licensing and taxation systems, and overlapping requirements at national and local levels significantly increase the cost of compliance for firms, thus perpetuating informality.”

Furthermore, the study highlights inconsistencies in sector-specific policies and regulations, particularly in industries such as mining and agriculture. These regulations often contain discretionary provisions, leading to heightened uncertainty and diminishing the appeal of these sectors for Foreign Direct Investment (FDI), The Zimbabwe Mail reports.

In addition, the study acknowledges that the agricultural sector continues to have a substantial share of both production and employment within the economy, receiving considerable government support and intervention. 

However, despite these factors, productivity levels in the sector remain notably low compared to other sectors of the economy. This is particularly evident in food crop production, where only tobacco and cotton show relatively higher levels of productivity.

The World Bank report added: “It will be essential for Zimbabwe to address these and other bottlenecks as a priority if the country is to fully harness the potential of its private sector and steer it toward better development outcomes.”