Sanity makes business sense

04 Feb, 2018 - 00:02 0 Views

The Sunday Mail

Taurai Changwa
For the umpteenth time, vendors and pirate taxis operating at undesignated spots were a fortnight given an ultimatum to vacate the central business district in the capital, but enforcement of the directive has been disappointing.

Debate on the issue of unlicensed vendors, who are essentially itinerant retailers within the city, has been very simplistic. It must be appreciated that business in every modern developmental State is regulated to ensure that there is compliance to both laws and by-laws, whichever is applicable.

While vendors, in view of the high unemployment rate plaguing the country, might have a germane reason to take up their current trade, this does not justify the wanton disregard of the law. Put simply, vendors should be allowed to trade, but only at designated points.

This is not only a moral argument, but an economic one as well. Not so long ago, a group of businessmen operating along Rizende Street had to raise objections with the Harare City Council when the city fathers closed off the road and designated it a zone from where licensed vendors could operate.

Quite clearly, this constitutes unfair business practice simply because it is inconceivable for brick-and-mortar institutions to compete with itinerant retailers who do not have any extra costs that they have to contend with, except token fee payments to council.

What is sad is that most of the costs incurred by formal retailers – except water and electricity – are statutory, which simply means that they feed into Government coffers. The licensing regime, depending on the sector that a particular business operates in, is quite stringent and adds an extra cost to doing business.

They pay shop rentals, taxes, NSSA and City of Harare for them to be in business. All these obligations become an extra cost to doing business. Conversely, vendors do not have any such headaches. Formerly, one would only need a hawker’s licence and they were done, but these days that is not something to worry about.

This is precisely the reason why most vendors have the temerity to sell their heavily discounted wares at the doorsteps of shops that are selling the same product. This is quite a disincentive for business. There is however a business case for Government to rein in such delinquency from vendors.

Besides demanding cash from customers, which adds an extra strain on already burdened consumers, most revenues generated by these informal businesses circulate outside the formal or mainstream monetary system. They actually perpetuate the circle of informality. If money is not captured in the formal system, it simply doesn’t work for the economy, a job which is better done by financial institutions through intermediation.

The role that banks and other financial institutions play in stimulating growth cannot be underestimated since their core function is to redistribute funds to productive sectors of the economy. In any civilisation, laws and by-laws are sacrosanct and enforcing the law is one of the key tenets of the rule of law. Granted, the city council has been trying to move vendors to designated sites such as Mupedzanhamo in Mbare, where vendors can freely trade, but this has been resisted.

Well, this is not difficult to explain. The reason why Chicken Inn and other fast-food outlets have been strategically positioned in areas where the demographics favour bountiful sales is exactly the same reason why vendors are located at crowded thoroughfares in the CBD and pavements. It is only logical – areas that are crowded are most likely to spur sales.

So the current difficulties by the local authority to rid the CBD of the troublesome vendors clearly show the battle of wills between city fathers who want to restore order and vendors who, in their view, are facing a real existential threat. This is the reason why they are digging in.

But this is not a unique challenge for Zimbabwe and, most importantly, the Harare City Council. However, other countries have managed this dilemma quite well. Some Chinese cities, for example, have special licences which allow vendors to operate in the CBD in the evening. They often set up their stalls when formal shops close for the day. And these vendors most often mop up last-minute sales from workers who are rushing home or those patronising the city in the evening.

But these are proper cities, where the lighting and the ambience is alluring. Also there are many people who live within the cities’ precincts. While all these factors might be different from Harare’s own peculiar circumstances, it is possible to tweak the model to make it applicable to the local situation.

Designating the day for formal businesses and the evening for vendors can really be workable, in addition to having designated sites where vending can take place during the day. Local authorities should take advantage of the current dispensation under the new political leadership to recommit to restoring the city, which is currently broken.

It is now time to go back to the basics, where by-laws are considered sacred. In any case, there is no investor, including local investor, who will have an appetite to open shop in such an environment which disincentives compliance and rewards those who do not comply. It should be part of the doing business reforms that are being pursued by local authorities under the Rapid Results Initiative.

So, this matter should be resolved once and for all. Government, therefore, should not relent and should see through the current renewed clean-up exercise.

 

Taurai Changwa is a member of the Institute of Chartered Accountants of Zimbabwe, Certified Tax Accountant and an Estate Administrator. He has vast experience on tax, accounting, audit and corporate governance issues. He is a director of Umar & Tach Advisory. He writes in his personal capacity and can be contacted at [email protected] or whatsapp on 0772374784.

 

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