Unpacking the role of Zimbabwean SMEs on the streets, where politics and economics are inseparable

Zimbabwean traders earn their living selling a whole range of products on the streets. Zimbabwe should give profound respect to our creative, or our entrepreneurial mind-sets, by doing something that acknowledges and underpins creation and innovation right at the very basic level where ideas start, says the writer. Photo: EPA

Underpinning the role of Zimbabwean Small to Medium Enterprises (SMEs) in a dispensation that no longer is just about politics but with economics.


By Brian Tawanda Manyati

Zimbabwe is a unique society, in many more ways that you realise. The people are our greatest asset, and more so the way Zimbabweans think, and arrive at solutions to our problems and challenges.
Rising formal unemployment has been one of the greatest challenges for quite some time. It requires solving head on.
Coupled with continued underemployment of limited and available economic resources, Zimbabwe`s has been a far cry inefficient operation from the production possibilities line or full employment line that we learn in economics.
We however, have not struggled, in spite of a tight or hugely declining economic space now going above 15 years running, to churn out a vast amount of very literate and able graduates at academic, vocational and tertiary levels.

Creative micro enterprises and SMEs help solve unemployment

SMEs are one serious part solution to the unemployment question we have. Informal employment, though overall positive impact is yet unrecorded or unmeasured in official statistics, has kept us going on as a nation under economic sanctions, and providing food on the table for most low and middle income households.
With the country`s light and heavy industries in major cities and satellite towns affected by closures of big industry firms, some in protest by the kith and kin of the former white farmers affected by the inevitable land reform exercise, some due to poor corporate governance of their own, which was a clear case with most troubled and curated indigenous financial institutions, and some due the ravages of a long stretching turbulent or unyielding business environment.
I have stated land reform as unavoidable though it brought with it protest industry closures, it is a good thing that even the European Union (EU) through its local ambassador`s message affirmed the agrarian reform as the correct position while same time urging us all to look forward with less acrimony.
In line with the spirit of looking forward, the calls made by the British Ambassador to Zimbabwe, Ms Catriona Laing, to a new generation of local entrepreneurs are worth reciting or re-emphasizing. Especially her observation that for instance the future of Bulawayo`s economy lies in creative industries.
That we need to look to the future, build on the creative industries, tech hubs, a different kind of an economy than the one we had before.
Here is what she had to share in addition, after her visit to the TechVillage in Bulawayo, a place where creative young people converge to share ideas which to her was an eye opener and could give birth to the future of that great city’s industries.
“We went to see the TechVillage and what we saw is amazing. We saw incredible young entrepreneurs doing all sorts of interesting things,” she said.
“We have young entrepreneurs coming up with renewal energies, incredible interesting inventions, young women doing online news services, another one doing bracelets for children in case they are abducted. The bracelet will detect fear and these are just few examples.”
The proliferation of micro and informal organisations is quite a relief deserving a special mention, attention and motivation.

Features of a micro or small enterprise

In auditing, the qualitative characteristics of a smaller entity include the concentration of ownership and management in a smaller number of individuals, and straightforward transactions, simple record keeping, few business lines, products, internal controls, management, and few personnel but with wider duties.
This is unlike, listed firms on the Zimbabwe Stock Exchange which have clear-cut separation of shareholder ownership from management as led by a board of none executive and executive directors.

Registration or formalisation

The starting point is it must be very easy and quick to register or formalise a micro or small to medium business enterprise in Zimbabwe, with the company registry office, as it is in Rwanda, thanks to the Rwandan Emissary, the Rwandan Development Board head Clarke Akamanzi whose recent official state visit pinpointed the importance of the creation and implementation of the one stop shop concept as has been on our Government`s cards albeit too delayed.
Zimbabwe Investment Authority (ZIA) which indicates that it is already on it, must quicken its feet on this one.
She indicated application processing and certification or licencing time can tremendously be reduced than what we at present read in the Doing Business in Zimbabwe 2018 World Bank Report.
Secondly we should give profound respect to our creative, or our entrepreneurial mind-sets, by doing something that acknowledges and underpins creation and innovation right at the very basic level where ideas start. If possible, if practicable, which I think it is, we should share and implement a view that a National Intellectual Property Registration platform be put up in Zimbabwe as a potential solution.
The suggested National Intellectual Property Registration platform should register from as far as business plans, to business models, same way it is already happening with company name registration on a first come first serve basis, innovatively, securely.
Business plans, can yes be a million, but where creativity is promoted we will see the plans are each unique, never similar word to word, thought layout and planned execution, from one visionary to another.
The concept should work just like the university research project submission software will pick forged, copied researches and instruct you to re-do.
Such a system will pick copy business plans and models from any potentially lazy politicians, ministry staff, private bank staff, big corporate executives or management, and their close connections or related parties, for wanting to submit or fund ahead of the originating creative what they may just have copied and edited slightly, them having closer access to the limited funds that the creative is after, but not better placed.
The cheaper Private Business Corporation (PBC) registration option in Zimbabwe, commonly called a Close Corporation in South Africa, is already a commendable move given it allows growth to private limited incorporation status with time.

Re-industrialisation and re-tooling delays, an opportunity to SMEs

There has been a call to re-industrialise or re-tool large and established companies, but this continues to face a plethora of challenges, e.g USD illegal externalisation followed by or leading to liquidity crisis, low business and investor confidence, obsolete plant and machinery not getting keenly replaced, policy inconsistency and even deliberate ignoring by some private and public firm executives of government policy or benefits thereof.
The SI 64 of 2016 a beneficial protectionist measure meant to safeguard the local industry from unfair foreign competition, has largely been ill-fated with some industry players in the supply chain or value network raising prices of locally produced goods and services often unjustifiably. The pronouncements and implementation of Special Economic Zones (SEZs) seen as crucial to courting investors has also taken time.
The argument therefore, becomes that all this leaves us stuck with the informal sector for quite some time ahead.
However, on the industry support players’ side, it is not a curse at all but a benefit in disguise as, at the world stage small to medium enterprises have gained wider recognition in the growth of economies.
Negativity or stigmatisation towards SMEs or micro entities should therefore, face stiff advocacy or activism for its end. Acts of subversion such as what faced the thriving and exemplary Glenview home industry area which was twice burnt in 2014/15, a sign of how certain retrogressive forces fight SME growth from flourishing, should stop.
In dealing with such risks or hazards rather, affordable insurance premiums and risk mitigation or actionable disaster recovery plans must be worked out for SMEs, with the help of mainstream insurance and risk and disaster management companies.

SME taxation

On the other hand, overburdening infant SMEs with tax obligations and penalties by ZIMRA must stop.
The penalty for non-submission of the income tax return is calculated at US$30 for every day and the return remains outstanding up to a maximum penalty of US$5 430 ($30 x 181 days), we must reassess if this is small business or start up business friendly. I think it is not. The same is the case with e.g failing to remit the tax payable of US$25 000 on 30 April of each year, thereby facing a 100% penalty chargeable and amounting to US$25 000.
While I am not condoning failures to remit tax, I am also watching the extent to which these hefty penalties save to discourage investment by an infant and struggling small local or foreign investor. In addition to the 100% penalty, interest of 10% per year is chargeable on the outstanding tax for the period the amount remains unpaid.
Again the rate of 10% should be looked into to see if it is justifiable and not too much.
I suggest tax breaks or reliefs like what are given Export Processing Zones, Growth Point Area investments and Special Economic Zones be afforded by Zimra to start up players as well, e.g first five years’ operating tax free or paying just token tax.
For instance, a staggered payment of annual corporate tax over time exceeding in excess of a year even though this may increase receivables ledger administration work on Zimra`s side.
For example, payment of estimate corporate tax for 2017 over two years 2017 and 2018, i.e 8 QPDs than the current 4 QPDs and related over or under provisions. This should be coupled with a possibility of waivers on a show of commitment to paying both provisional estimate tax for 2017 in 2017 and the remaining outstanding tax for the same 2017 year in 2018.
While I acknowledge that taxation is the main revenue source for government, abrasive thinking is needed at Zimra, such as considering a very low corporate tax rate regime than the mainstream rate of 25.75%, the same way for instance, export receipts above 50% of gross sales turnover are landing a local firm a corporate tax rate of 15.45%.
This route may equally be good to consider for small entities over say the first six years, for simply being under the small entity threshold, and a much further lower rate for being both small and having export receipts of above 30%, 40% or 50% of gross sales turnover.
The more emergent corporates successfully stay as going concerns, surviving, the more revenue Zimra generates from a widened tax net now, than the case is if more and more emergent overburdened small corporate collapses are suffered by our growth oriented or economic recovery seeking nation.
SMEs should use tax avoidance which is legal, and involves taking advantage of enacted tax legislation in order to reduce the tax liability, by e.g claiming the maximum allowable deductions available.
This should be promoted as opposed to tax evasion which involves deliberate misrepresentation of facts or concealment of information by taxpayers in order to reduce the tax liability illegally, for instance, understating sales revenues.
However, tax avoidance has since been overtaken by tax mitigation in other jurisdictions.
It is argued that, tax mitigation does not frustrate the intentions of Parliament when reducing the potential tax liabilities whereas tax avoidance though not criminal does. ZIMRA should do a lot of publicity blitz to create awareness of tax mitigation routes available to SMEs in Zimbabwe.
Qualified tax consultants have to be used by SMEs, but in turn the qualified consultants need to be affordable.
They are independent, and are not in it just for the money after submitting SME tax returns and will not attempt to falsify accounts as their heads and professions are on the block. Yes with strict monitoring it is how it is for them, can easily be disqualified.

Lending or funding SMEs

Denying SMEs working capital and productive loans by the traditional local financial institutions with foreign parenthood or ownership, the same challenge A1 and A2 indigenous farmers have long since faced, must stop.
Instead, affordably meaningful micro financing divisions and schemes should be arranged by banks, more of the the like of Kingdom bank MicroFinance arm.
The retailing of financial services which world over is growing in importance as it focuses on breaking bulk so as to suit each end user of banking services, mainly individuals and SMEs, should in Zimbabwe be given increased attention.
Equally, revitalisation of the function of credit guarantee schemes or credit guarantee insurance corporations on the local financial services market must be prioritised.
With the RBZ’s frantic calls for exportation, we should tap at the continental level from the Credit Guarantee Insurance Corporation of Africa Limited (CGIC) which is the largest credit insurer in Africa, focusing on underwriting for the domestic and export credit insurance arenas.
There also is a necessity for income or asset government grants or subsidy assistance to very promising SMEs in a non-partisan manner.
Youth loans must not also stop flowing due to bygones that obtained before e.g the Kurera Ukondhla youth fund which was mismanaged leading to a high default or underperforming loan rate. Youths are an important segment, the preserve of a high number of entrepreneurial start-ups, give them more chances than pinning them down. I am not condoning financial indiscipline.

SME financial reporting and accounting

The embrace of the International Financial Reporting Standard (IFRS) for SMES entails that our local SMEs and micro enterprises must begin to cherish the importance of keeping sound financial records so as not to be left out on the global arena best practice. According to the IFRS Foundation (2016), in less than seven years since its publication, the IFRS for SMEs Standard is now a requirement or permitted in 56% (80/143) of profiled jurisdictions while a further 11 jurisdictions were considering doing so then.
For instance, in consulting small firms wanting approvals of their foreign investment plans for approval by the RBZ, you realise that some though lucky to court foreign investors upon offering a stake, commonly 49%, as was guided by the Indigenisation Act before the recent 2018 changes, face a hurdle especially when lacking verifiable financial reporting and management reporting support documents e.g trade invoices, inspect able or existent property, plant and equipment capable of independent valuation.
When professional consultants or accountants refuse to sign up verification papers required by the RBZ for limitation of scope reasons and correctly so, this hampers possible growth for SME players given that foreign direct investment plans then fail to gain approval with the RBZ. Where non-beneficial short cuts end up getting used by the informal entrepreneur they also end up risking that the foreign investor finds and pulls out.

Section 150 (7) – Appointment and remuneration of auditors of the Companies Act (Chapter 24: 03)

External Audits for SMEs in our company law are not a requirement. Section 150 (7) – Appointment and remuneration of auditors of the Companies Act (Chapter 24: 03) states that a private limited company shall not be required to appoint an auditor if the number of its shareholders does not exceed ten; none of its shareholders are a public company or private company which is a subsidiary of a public company; and it is not a subsidiary of a parent company that has itself appointed auditors; and provided all the members in such a company agree an auditor shall be appointed.
However, a non-statutory audit or a review engagement is one way in which sole trader businesses, partnerships, charities, clubs, etc, are capable of being audited thus bringing about advantages such as provision of an independent means of accounts settlement between partners; more acceptable accounts to tax authorities for the determination of tax liability (even though Zimra does not necessarily require audited accounts); credibility to loan negotiations or overdraft facilities with financial institutions (however the banks may also want the accounts as raw as they can be, i.e unaudited to get the true picture of small traders` operations); and assurance to a sleeping partner of the financial status and performance of the business.
These non-statutory audits can be carried out by one man qualified public accountants or very small but certified accounting firms through the PAAB.
What foreigners privileged to be in reserved sectors for locals, can at least do for us
Kindly pay taxes to our relevant Government arms. It is how you can best pay back locals for giving space as opposed to getting xenophobic as it is in other countries where rage ends up taking over out of feeling duped or disadvantaged further when foreigners get into reserved sectors for locals, e.g retailing in Zimbabwe.

Effective taxation of SMEs

Effective taxation of SMEs is no doubt also enabled through cooperation with tax authorities by small foreign owned businesses as opposed to resistance eg implementation of fiscalised electronic registers for proper rendering of VAT returns so long monthly turnover exceeds USD5 000, depending with the allocated or elected submission category.
Criminal law, theft related acts of bribery and deception used by foreigners, in the reserved retail sector, mainly Nigerians, Chinese and Indians, though the later have been here for long with us natives, must stop.
Kindly apply and acquire swiping machines from the RBZ or Commercial banks, than to continue to turn customers out for wanting cash up front. Grace or olive hand afforded by the 2017 National Budget must not be abused by continued unscrupulous running of foreigner owned small shops in our major cities and towns.
The downtown buildings too should show there is re-investment or earnings retention going on, by way of vivid construction developments of much better looking shops and cleaner, healthier environments as opposed to a headline of tuck-shops or welded walls in the middle of the city centre.
Taking advantage of lax City Authorities is not always the way to good conduct of afforded business opportunity.
Similarly, foreign owned SMEs should begin to register employees on the National Social Security to guarantee them a minimum set of post-retirement benefits as well as taking Occupational Health and Safety issues seriously, starting with little things such as provision of protective clothing to employees, like nose masks and gloves at inventory counts, eye protection screens to clerks, and respect for ergonomics in those small offices, etc.


Formal unemployment in Zimbabwe is capable of addressing after all, it appears only to be through ways that require embracing a change of the economic order which at best simply is doing everything aimed at the formalisation of the informal sector, more so voluntarily by small business owners and traders.


Brian Tawanda Manyati is a qualified Chartered Secretary and Administrator and a Certified Accounting Technician, IFRS Expert & Content Reviewer who writes and makes, entrepreneurial, business, socio-economic and political analyses from a business and economic angle in his own personal capacity. He is contactable on +263772815211 or tawandamanyati@gmail.com, and on facebook.


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