MORE than 300 companies closed shop in the first half of 2016, with more expected to shut down by the end of the year, raising informalisation of the economy to 94%, a renowned economist has said.
Since the end of the unity government in July 2013, the country’s economy has continued to struggle despite promises of a turnaround by President Robert Mugabe and his ruling Zanu PF party.
Speaking at the Mass Public Opinion Institute (MPOI) public seminar in Harare last Thursday Dr Prosper Chitambara said the number of companies forced to closed shop is likely to double by the end of the year.
“There has been a lot of deindustrialisation that has taken place between January and July this year with 300 companies having closed shop,” said Chitambira, an economist with the Labour and Economic Development Institute of Zimbabwe.
The development has negatively impacted development of the national economy as the state could not tax the informal sector.
“94% of the economy is now informalised up from 84.2% in 2011, so the rate of deindustrialisation and informalisation has accelerated and that obviously has some negative implications in terms of domestic resource mobilization and employment and development.
“If most economic activities are in the informal hands it affects the capacity of government to mobilize domestic or fiscal resources.”
Under the coalition government between President Mugabe and his political rivals, Zimbabwe’s economy enjoyed sustained growth albeit from virtual collapse.
However, when the veteran leader and his party assumed sole charge after the 2013 elections, investor confidence dived with an estimated $10billion said to have spirited out of the country.
International goodwill also waned with little foreign direct investment targeting Zimbabwe while financial support from global lenders also proved hard to come by.