The Sunday Mail
NEO-LIBERAL economists often posit that capital is a coward that has a penchant of taking to its heels at the slightest sign of danger.
The is need to forcefully rein in illegal activity
They further caution that policymakers should be temperate in the way they treat the market.
It is this philosophy that has arguably helped to further entrench white monopoly capital, particularly in Africa.
Pioneering literature describing how exploitative such an economic architecture is to developing economies include works such as “The Political Economy of Growth” (1957) by Paul Baran; and “The Theory of Capitalist Development” (1966) by Paul Sweezy. Both were North American economists.
In essence, they argued that under-development and poverty were primarily (but not entirely) the function of the accumulation and expansion of capital in and from the Western industrial societies (the North) to the colonies (the South) — the movement of capital from the centre to the periphery and the reverse flow of surplus value from the South to the North to strengthen further accumulation and expansion in and from the North.
Seemingly, it is this pattern that has created a unipolar world.
But the emergence of China has provided a powerful alternative economic philosophy: that a people’s dictatorship, where an iron fist is used to promote discipline and direct the markets, can equally be harnessed to promote economic growth.
Much to the disdain of the Western world, which is still struggling to foist its economic philosophy on developing countries, China has been able to show the world that governments can interfere in the markets for the greater good of the economy.
Despite this strong hand, foreign direct inflows into China have been able to eclipse the US over the years.
In 2012, China’s FDI at US$59,1 billion was relatively higher than inflows in the US, which topped US$57,4 billion.
This is contrary to the doctrine of laissez-faire capitalism (advocating for free markets) often driven by the World Bank and IMF.
And since 1999, Zimbabwe’s Government has periodically been interfering in the local market in order to correct the aberrations induced by US and European Union sanctions.
Such a strong hand is needed now.
Rampant indiscipline by illegal vendors in various cities dotted around the country has to be dealt with decisively.
The toll that such practices are having on the economy is huge.
Illegal vending, especially in the city of Harare, was first endemic, affecting only isolated parts of the city, but it has since grown to epidemic and pandemic proportions.
Attempts to control such run-away indiscipline has of late come to nought.
Confronting the minotaur
It is understandable, but definitely not justifiable, for authorities to have a soft spot for vendors, especially in such a challenging economic environment where formal employment is becoming increasingly difficult.
Illegal vendors are somewhat a half animal and half man of sorts, a minotaur.
In Greek mythology, a minotaur is a creature with the head of a bull on the body of a man.
It is a toss-up if by killing the creature one will be killing a man or a beast.
Vendors have to make a living in trying times, but, on the overall, their activities are damaging the economy.
In any case, the law is the law.
Illegal vending has grown to such an extent that it now resembles a monstrous rogue retail outlet.
The sheer quantities of second-hand clothing items, which ideally are supposed to attract a punitive rate of duty relative to new clothing items, is unbelievable.
For its part, central Government has been trying to address this anomaly.
The 2012 National Budget and subsequent amendments to the Customs and Excise Act through Statutory Instrument 154 of 2001 removed clothes from a list of items covered by the US$300 traveller’s rebate.
With effect from January 1, 2012 the rate of duty on all imported clothes, even those within the US$300 duty free allowance, was put at 40 percent plus US$300 per kg.
Presently, second-hand clothing attract a customs duty rate of US$5 per kg and 15 percent VAT.
However, the taxman believes that there is need to review the tax structure in order to ensure that the price of new clothes become relatively cheaper than second-hand clothes.
Zimbabwe Revenue Authority Commissioner-General Mr Gershem Pasi told the Parliamentary Portfolio Committee on SMEs and Co-operative Development on June 25, 2015 that a revamp of the local system would naturally help to capacitate formal retail outlets, a development that will have a positive multiplier effect on the economy.
“Let’s review our taxation especially on clothing. Taxation on clothing is very high which makes people buy second-hand clothes.
“We wake up with diseases we don’t know where they come from.
“Let us allow the people to bring in the clothes and reduce the rates drastically,” opined Mr Pasi.
He said more jobs would be created by selling new clothes, while Government would get taxes through pay-as-you-earn and VAT.
But it is not only the clothing sector that is affected, as retail outlets that are selling fast moving consumer goods and household items are also bearing the brunt of a burgeoning illegal vending sector.
Formal retail outlets, which crucially are a source of Government revenue, have to contend with multiple regulatory and statutory costs that ultimately determine their pricing structure.
On the other side of the spectrum, illegal vendors – peddling items that have mostly been smuggled into the country through illegal crossing points – do not shoulder any such onerous obligations.
And this is precisely the reason why their prices are considered affordable.
So, at the end of the day, we have a shrinking formal sector that Government expectantly looks to for resources on one hand and a growing informal sector that is not able to be taxed on the other.
This cannot be good for the mainstream economy.
Government must therefore muster all its arsenal in order to rein in illegal economic activities in order to save the mainstream economy.
Vending is not illegal, but illegal vending is illegal.
Such activities need to be conducted in a regulated manner that is systematically captured by Government.
Voltaire, the famous French philosopher, once said: “It is better to be ruled by one lion than by a thousand rats.”
There are dangers that come with trying to be overly accommodative to views that ordinarily cannot be entertained.
At the end of the day, the people’s dictatorship must triumph.
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