Johnson Progress

Zimbabwe’s entrepreneurs are being suffocated by excessive regulation and a crippling tax burden, driving a mass exodus into the informal economy, according to a leading economist.

The stark warning follows alarming new data revealing the informal sector now dominates a staggering 76.1% of the economy.

Misheck Ugaro, Vice-President of the Zimbabwe Economics Society, delivered a blunt assessment last week at the Employers Confederation of Zimbabwe (Emcoz) conference in Kwekwe: “Entrepreneurship cannot flourish in an over-regulated economy.”

His comments came hot on the heels of a Zimbabwe National Statistics Agency (ZimStat) report showing the informal sector surged by 16.1 percentage points.

Ugaro pinpointed the core drivers of this “clear acceleration of economic distress”: an overwhelming weight of taxes, suffocating bureaucratic red tape, and pervasive policy uncertainty.

He described the current environment as profoundly difficult for business creators, revealing “how hard it was for entrepreneurs.”

“Authorities urgently need to improve the ease of doing business,” Ugaro declared, advocating for a radical simplification dubbed the “one government contract.”

This system would centralize all registrations and licensing.

“Everything is done at one place,” he explained.

“So, it doesn’t take time. You pay one licence fee, and it covers everything, and that licence fee must not be extended. You pay one fee, and you have all your required documents.”

The scale of the tax burden underscores Ugaro’s argument.

Research by the independent fact-checking body ZimFact identified at least 50 distinct taxes levied through complex legislation including the Finance Act, Income Tax Act, Customs and Excise Act, Capital Gains Tax Act, Value Added Tax Act, Stamp Duties Act, and Revenue Authority Act.

This fragmented system creates significant compliance hurdles and costs.

Ugaro emphasized that genuine entrepreneurship requires a stable macroeconomic foundation.

“The point is that if the economy is stable, then we have real entrepreneurs who are in it for being entrepreneurs, not in it as a survival reaction to a bad economy,” he stated.

“The importance of macroeconomic stability to entrepreneurs is very pronounced… stability drives confidence in entrepreneurs to want to explore new things.”

While acknowledging that extreme stability might occasionally dampen risk-taking elsewhere, Ugaro stressed Zimbabwe’s instability is primarily forcing people into survivalist ventures.

 

“Right now, it is pushing people to create things,” he observed, but highlighted a critical knowledge gap: “We do not know… the portion of people who are creating things. Who is there for business, and who is there for survival?”

 

He lamented the lack of local research to distinguish opportunity-driven entrepreneurs from necessity-driven ones, forcing reliance on international studies.

 

This gap, he argued, hinders effective policy formulation.

 

The government points to efforts like the Zimbabwe Youth Council’s partnership, which has facilitated the formalisation of over 9,000 youth enterprises since the COVID-19 pandemic to combat unemployment.

 

However, the explosive 16.1-point leap in informality to 76.1% starkly illustrates that these initiatives are being massively outpaced by the flight from the formal sector, intensifying pressure for the fundamental regulatory overhaul demanded by business leaders and economists like Ugaro.