Livingstone Marufu BH24 Reporter
Approximately 29 000 Small to Medium Enterprises (SMEs) have benefitted from Works Programme meant to formalise small businesses in order for them to access more resources.
Works, which is a five-year initiative, is funded by the USAID, DFID and SIDA to strengthen public private partnerships to build skills and improve well-being of young Zimbabweans especially women to contribute towards economic growth in Zimbabwe.
Under the programme, which expires this September, Zimbabwean SMEs received a $12, 5 million fund in June 2012 from international aid groups.
Works project and participants is said to have generated about $31 million in income and created 6 000 jobs for the youths.
Small and Medium Enterprises and Cooperative Development Minister Sithembiso Nyoni, told The Herald Business that local SMEs benefitted from training services and access to cheap loans.
“We are happy that over 29 000 young people managed to access cheap funding from the Works programme to formalise their businesses in order to access more loans, expand their businesses, contribute to the fiscas and thereby contribute to the broad economic development of Zimbabwe.
“Businesses should formalise or form partnerships so that they can grow into big business which can be able to raise capital for themselves,” said Minister Nyoni.
Minister Nyoni said it is only through formalisation that SMEs can be able to get more funding for their businesses.
Over the past years Zimbabwe’s economy has gone informal due to the shift of resources from the mainstream economy into the informal sector.
Already, independent surveys suggest that SMEs contribute over 50 percent of gross domestic product (GDP) while employing about 60 percent of the population.
There is a general belief that most SMEs are not registered because they fear being over-taxed by Zimbabwe Revenue Authority while others view registration as expensive.
However, failure to register has resulted in many SMEs failing to benefit from the various financing facilities that have been availed by Government and financing institutions.
In 2016, Government explored options to broaden the tax base, the SMEs and Co-operatives Development Ministry has requested a resource envelope of $32 million from Treasury to formalise unregistered and non-compliant small businesses.
Zimra has been able to augment revenue collections from the formal sector through rolling out its fiscalisation project, in which businesses have to use fiscal tax registers that capture financial information and relays it in real time to tax authorities.
However, SMEs have not been subject to this and there is a growing push to ensure informal businesses start contributing to tax revenues.
Minister Nyoni said Government wanted to establish a comprehensive database of such businesses.
To date 14 000 SMEs have complied with Zimra’s fiscalisation process.
Government, through the Ministry of Finance and Economic Development, issued a six-month moratorium on penalties for non-compliant small and medium-sized enterprises that were eligible for tax registration before January this year.
Policymakers are betting that main streaming informal businesses will improve revenue flows into the fiscas.
Small businesses that cannot qualify for the various tax categories stipulated by Zimra are usually obliged to pay presumptive tax, which, essentially, is tax levied on presumed income.