Almot Maqolo, Staff Writer 
ZIMBABWE’S manufacturing sector is being crippled by a thriving “pavement economy,” where smugglers flood the market with essential commodities like soap, evading Value Added Tax (VAT) and leaving local producers at a 15 percent disadvantage.
Smugglers sell soap on the streets for as little as US$1, while local manufacturers, burdened by VAT, are forced to charge US$1,15, making it difficult for them to compete.
This issue extends beyond soap manufacturers, affecting the oil expressers who supply them.
Busisa Moyo, a leading industrialist and former president of the Confederation of Zimbabwe Industries (CZI), has voiced strong concerns over the challenges facing local manufacturers.
Busisa Moyo, a leading industrialist and former president of the Confederation of Zimbabwe Industries
He called for fairness in the sector, advocating for VAT removal on essential items like soap, as was done with beef and other staples.
“We obviously would like to see items like soap benefit from VAT exemption. Just as we saw with beef and other essential commodities, we advocate for VAT removal,” Moyo said.
“Our soap manufacturers, who are largely oil expressers and key members, struggle to compete against smugglers selling VAT-free soap. This puts us at a 15 percent disadvantage from the outset. Smugglers operate freely on the pavements.”
He emphasised the serious public health and hygiene implications of making soap unaffordable due to unfair pricing structures, stating, “The pavement economy sells the same soap for US$1, whereas we must sell it for US$1,15. This puts us out of the market.”
Moyo urged policymakers to consider revising tax policies to support local industries during upcoming budget discussions.
“We think that for our sector to be vibrant, we need some help there. And that’s a submission we’re hoping policymakers will take up in the coming budget.”
Zimbabwe’s informal sector has grown to an estimated 60 percent of the economy, driven by factors such as unemployment and currency instability.
Veteran economist Eddie Cross recently highlighted that smuggling and informalisation are strangling the formal sector.
“What is critical is to get to grips with why our economy is informalising and dollarising so rapidly,” Cross said.
“The formal sector is in deep trouble, our retail sector cannot compete, and the manufacturing sector is shrinking. Job growth has stopped and reversed. Smuggling has increased, and we are once again the dumping ground of the region.”
Economist Victor Boroma also noted that while VAT reduction may help, it won’t fully address the deeper issues driving informalisation.
“High levels of inflation, foreign exchange disparities, and operational costs are the main causes of informalisation,” he explained.
As Zimbabwe grapples with inflation and currency instability, consumers are increasingly turning to cheaper, often lower-quality alternatives from the informal sector.
The challenge for policymakers is to strike a balance between regulating the informal economy and fostering an environment where local businesses can survive and thrive. newsdesk@fingaz.co.zw
