Zimbabwe’s national statistical agency, ZimStat, recently reported that 76% of the national economy is informal. This should be of no surprise to anyone, but what to do about it is the big question troubling policymakers. We know the causes: failure to invest in the core economy, lack of external financing, mountains of inherited regulation and poor economic governance. But is the solution to try and tax and ban the informal economy or work with it, avoiding unnecessary distortions and disincentives?
Many of those notionally in the formal sector of course also engage in the informal economy. Ask any teacher, health worker or government civil servant and they all do other work making money when their salaries are inadequate. The boundaries between the formal and informal are very obscure these days, meaning that taking the informal economy seriously – which after all is the majority economy – must be important.
This article is from Zimbabweland, a blog written by IDS Research Fellow Ian Scoones. Zimbabweland focuses on issues related to rural livelihoods and land reform in Zimbabwe.